KYC compliance DIR3-KYC : Govt to allow directors to submit details with reduced fee of Rs 500/= for 15 days-ON OR BEFORE"before 5th October, 2018

KYC compliance DIR3-KYC : Govt to allow directors to submit details with reduced fee of Rs 500/= for 15 days-ON OR BEFORE"before 5th October, 2018  

FILING WITH FEE OF RS 500 IS HAPPENING NOW

The directors whose Director Identification Numbers (DINs) were deactivated following non-filing of new know-your-customer norms can get them reactivated by giving KYC details with a late fee of Rs 500. They can file the e-form till October 5, said government sources. It is likely to be notified shortly.

ADDITIONAL 15 DAYS IS BEING GRANTED

Earlier, the fee for late filing was Rs 5,000. The Ministry of Corporate Affairs (MCA) decided to give 15 more days to nearly 21 lakh directors to comply with the KYC norms. The deadline for filing DIR-3 KYC form had lapsed on September 15. The filing could be done free of cost till then.

ONLY 12.15 LAKH COMPLIED DIR-3 KYC SO FAR

The decision to extend the deadline comes after close to 21 lakh directors out of a total of around 33 lakh failed to file their KYC details with the MCA-21 system and subsequently, their DINs were deactivated. Only 12.15 lakh directors filed their personal details with the government.

REQUEST BY ICSI , ICAI FOR EXTENSION OF TIME

Several directors, as well as organisations such as Institute of Chartered Accountants of India (ICAI) and Institute of Company Secretaries of India (ICSI) had sought more time for filing citing practical difficulties such as time-consuming process and difficulty in the functioning of the website.

On July 14 this year, the MCA, under the supervision of its secretary Injeti Srinivas, had introduced the KYC norms for all the 33 lakh directors registered in the country.

The electronic form is aimed at preventing fly by night operators and dummy directors who are non-existent.

ATTACHENTS FOR DIR-3 KYC

Directors have to provide details such as personal mobile number, e-mail address, Permanent Account Number (PAN) and Aadhaar number in the new form, duly signed by a chartered accountant (CA) or a company secretary (CS). There is also be a video verification feature requiring directors to upload a 30-second video clip introducing themselves.

EVERY YEAR DIR-3 KYC HAS TO BE FILED

From next year, the new form is to be filed by the directors annually at the time of filing annual statements.

Late filing of e-KYC filing will attract a fee of Rs 5,000 after October 5 deadline ends. Each director who has been allotted DIN on or before March 31, 2018, has to file it.

EVEN DISQUALIFIED DIRECTORS HAVE TO FILE

The e-KYC rule is also applicable to those directors who have been disqualified by the government in the past for flouting norms.

SOME RELIEF

·        They can file the e-form till October 5. Earlier deadline was September 15  

·        Late filing of e-KYC filing will attract a fee of Rs 5,000 after the Oct 5 deadline ends   

·        The e-KYC rule is also applicable to those who have been disqualified

LLP RULES AMENDED.-PROCESS RE-ENGINEERING OF LLP INCORPORATION RELATED FORMS

PROCESS RE-ENGINEERING OF LLP INCORPORATION RELATED FORMS

LLP related incorporation forms are likely to undergo process reengineering shortly.

LLP (Second)  Amendment Rules 2018-Applicable from 02.10.2018

Now LLP can be incorporated with upto 2 individuals as Partners who do not have DIN... on the similar lines as Spice Form for Company Incorporation

LLP RULES AMENDED.

 Now RUN LLP will be filed for reservations of llp name  and llp incorporation forms will be processed by CRC ( Central registration centre ) wef 02.10.2018.

 Upto 2 Persons not having din and want to be appointed as designated partners  can file din application along  with incorporation forms. 

So from 02nd October, LLP name reservation application can be filed through Web form RUN like company name application and persons don't have din can also apply for the same. 

Earlier we were unable to apply for reservations of LLP name and incorporation of LLP if the partners don't have DIN. Now the much awaiting amendments applicable from 2nd October cleared the obstacles of new llp incorporation.

No.	Existing eForm	New eform	Change Proposed	To be processed by
1	Form 1(Application for reservation or change of name)	LLP-RUN(Reserve Unique Name) Web Service	Web Service RUN will replace Form 1	Central Registration Centre(CRC) under Non- STP
2	Form 2(Incorporation document and Subscriber’s statement	FiLLiP (Form for incorporating LLP)	I. FiLLiP will be an integrated form offering multiple services viz. allotment of DIN/Reservation of Name and Incorporation of LLPs. II. Consequent upon notification of FiLLiP, existing Form 2 will be deprecated.	Central Registration Centre(CRC) under Non- STP
3	Addendum to Form 2(Details in respect of designated partners and partners of Limited Liability Partnership)	Addendum to FiLLiP (Details in respect of designated partners and partners of Limited Liability Partnership)	I. RUN-LLP SRN to be substituted for Form 1 SRN in relevant field II. PAN is allowed to be entered in DSC section	Central Registration Centre(CRC) under Non- STP
4	Form 5 (Notice for change of name)	Same form with minor modifications	I. Details which were hitherto getting prefilled in the form (based on Form 1 SRN) shall now be entered by the user. II. RUN-LLP SRN to be substituted for Form 1 SRN in relevant field	Central Registration Centre(CRC) under Non- STP
5	Form 17(Application and statement for the conversion of a firm into LLP)	Same form with minor modifications	RUN-LLP SRN to be substituted for Form 1 SRN in relevant field II. PAN is allowed to be entered in DSC section	Central Registration Centre(CRC) under Non- STP
6	Form 18(Application and Statement for conversion of a Private Company/Unlisted Public Company into LLP)	Same form with minor modifications	RUN-LLP SRN to be substituted for Form 1 SRN in relevant field II. PAN is allowed to be entered in DSC section	Central Registration Centre(CRC) under Non- STP

Following process flow changes are proposed to enable the LLP incorporation process re-engineering:

· All Form 1 and Form 2 (along with Form 17/18/Addendum) which are pending processing from the date of

notification of revised forms, shall be marked under Resubmission.

· All forms which have to be resubmitted, must be submitted again in the new web service/new forms only.

· All names which have been approved and against which Incorporation form is not filed till the date of

notification of revised forms, shall be allowed to be used to file form FiLLiP for incorporation.;

·      All names which have been approved and against which Change of name Form 5 is not filed till the date of

notification of revised forms, shall be allowed to be used to file in revised Form 5.

CHANCES FOR EXTENSION OF DIR 3 KYC

CHANCES FOR EXTENSION OF DIR 3 KYC 

The government is considering giving another opportunity to 2.1 million company directors who have failed to comply with the ‘know your customer’ (KYC) norms, according to a senior official. 

The government could give another 15 days for meeting the compliance norms or reduce the penalty for late filing, the official said, requesting not to be named. In June, the corporate affairs ministry had decided to seek KYC for all 3.3 million active directors. The last date for complying with the  . the new norms by way of submitting form 'DIR-3 KYC' without fee ended on September 15. 

2.1 MILLION DINS WERE DEACTIVATED

Only 1.2 million directors were able to complete KYC. The post of remaining 2.1million can be re-activated only after a fee payment of Rs 5,000 along with requisite form. “We are looking at the option of either providing a window of 15 days or reducing late fee.

CORPORATE AFFAIRS MINISTER REVIEWED THE SITUATION

The situation has been reviewed by corporate affairs minister Arun Jaitley. A lot of these people are genuine directors who could not complet the process,” the official said. “Decision on providing another window could be taken once the corporate affairs secretary, who’s currently traveling, is back.” 

REPRESENTATION BY ICAI

The Institute of Chartered Account of India and several other corporate bodies have also made representations to the ministry, requesting them to extend the period by another 15 days. 

NON FUNCTIONING OF MCA WEBSITE

“The website wasn’t functioning properly between September 13 and September 15. Also, there were glitches in uploading the digital signatures,”

UNION MINISTER DIN ALSO DEACTIVATED

ICAI president Naveen ND Gupta wrote in a recent letter to the ministry. Among those whose director identification number (DIN)—a unique number allotted to individuals eligible to have directorship on boards of registered companies— is being de-activated for non-compliance is a Union minister, a person in the know said.

THE OBJECTIVE OF KYC

As a part of the KYC drive, company  directors had to provide their passport, PAN and contact details, such as phone number and email address. They were required to link their Aadhaar and PAN with the DIN. 

TO WEED OUT FAKE DIRECTORS NAME

The move is aimed at weeding out fake names being listed as genuine directors. This was a part of the government’s larger strategy to clamp down on shell companies. The government is currently in the process of de-registering 200,000 such companies. These companies have been struck off for not carrying out any business or operation in the last two years. 

COURTESY : ECONOMIC TIMES

NOW PUBLIC COMPANIES CAN PAY MANAGERIAL REMUNERATION WITHOUT GOVERNMENT APPROAL –SAYS MCA

NOW PUBLIC COMPANIES CAN PAY MANAGERIAL REMUNERATION WITHOUT GOVERNMENT APPROAL –SAYS MCA

NO GOVERNMENT APPROVAL IS NEEDED – ONLY APPROVAL OF SHAREHOLDERS BY SPECIAL RESOLUTION IS NEEDED

Public companies no longer require government approval for paying salaries beyond certain thresholds to their managerial personnel under the companies law, according to a communication.

Relaxing the norms, the Corporate Affairs Ministry Thursday said that in such cases, only approval of shareholders by way of a special resolution would be required.

Till now, public companies were required to get nod from the ministry when it comes to giving remuneration beyond certain levels to their managerial personnel.

NO NEED TO GET GOVERNMENT APPROVAL IN EXCESS OF 11% REMUNERATION TO MANAGERIAL PERSONAL BY A PUBLIC LTD COMPANY

The approval of the "central government shall no longer be required for the payment of remuneration to managerial personnel (in excess of 11 per cent of the net profit of a company)," the ministry said in a release.

The ministry said the move is in pursuance of the policy of minimum government-maximum governance and providing ease of doing business to the law-abiding corporates of this country.

A company can make such payments after getting shareholders' nod through a special resolution, which requires the approval of members having at least 75 per cent of the voting rights.

There are public as well as private companies under the Companies Act, 2013. Generally, public companies are subject to stricter corporate governance requirements and have more than 200 members.

As per official data, there are more than 70,000 public companies.

There have been concerns in certain quarters about instances of exorbitant pay packets being doled out to top personnel of companies.

EXISTING LIMITS TO PAY MANAGERIAL REMUNERATION BY PUBLIC COMPANIES

Under the Act, there are certain limits regarding pay to managerial personnel by public companies. The limits are calculated against a company's net profit.

The cap is 1 per cent for non-executive directors put together and the same can go up to 3 per cent subject to certain conditions.

For whole time directors and managing directors, their total pay can be up to 10 per cent. Combining both, the total remuneration limit would be 11 per cent.

Till now, any amount to be paid above that cap required the ministry's approval and this provision has been done away with the revised norms, according to ministry officials.

In case a company has defaulted in payment of dues to any bank, financial institution or non-convertible debenture holders, approval of the entity concerned would be required before the remuneration proposal is put up to the shareholders.

COMPANIES WAITING FOR MCA APPROVAL CAN PAY TO THEIR MANAGERIAL PERSONNELS WITHOUT GOVERNMENT APPROVAL

With the notification of the revised norms, the ministry said "all pending applications submitted to the ministry for approval of proposals for payment of managerial remuneration in excess of the limits laid down, would automatically abate and companies are free to obtain requisite approvals for those proposals, from the shareholders within one year".

AMENDMENT WITH EFFECT FROM 12 SEPTEMBER 2018

The amended norms have come into effect from September 12.

About the amended norms, Corporate Affairs Secretary Injeti Srinivas told PTI that shareholders can make "rational and viable decision" with respect to managerial remuneration.

The ministry said relevant changes have also been notified to Schedule V of the Act. Schedule V mainly pertains to eligibility and remuneration of directors.

"... in case of loss or inadequacy of profits, remuneration can be paid only in accordance with the provisions of Schedule V and no approval of the central government would be required for the same on a case to case basis," it said.

MR-2 e-form would have to be filed only for appointment of managerial personnel as per the revised Schedule V. Till now, the form was to be submitted to the ministry for appointment and remuneration of managerial personnel.

PROPOSED AMENDMENT IN RE-CLASSIFICATION OF SHAREHOLDERS-AMENDMENT TO LODR

PROPOSED AMENDMENT IN RE-CLASSIFICATION OF SHAREHOLDERS

AMENDMENT TO LODR

SEBI has issued SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015 (“SEBI LODR Regulations”) on September 2, 2015 which was enforced with effect from December 1, 2015 other than regulation 31A and 23(4) which were effective from September 2, 2015.

REGULATION 31A OF SEBI LODR

Regulation 31A of SEBI LODR Regulations provides for disclosure of class of shareholders and conditions for reclassification of shareholders of listed entities in limited circumstances. The Companies Act, 2013 is silent on this topic, however, general compliances will be applicable as per the process provided in the regulation.

UDAY KOTAK COMMITTEE

SEBI on the recommendations of the Uday Kotak Committee on corporate governance dated July 24, 2018 has come out with proposals to simplify framework on re-classification of shareholders. In order to increase simplicity and bring greater clarity, SEBI has also proposed a single set of conditions applicable to all scenarios of re-classification of promoters as public shareholders.

 DIFFERENT TYPES OF SCENARIOS FOR RECLASSIFICATION OF SHAREHOLDERS FROM PROMOTER TO PROMOTER/PUBLIC

1. Where a new promoter replaces the previous promoter subsequent to an open offer or in any other manner.

2. Where an entity becomes professionally managed and does not have any identifiable promoter.

3. Where there are multiple individuals classified as promoters out of which one does not wish to continue as one.

4. Where there are multiple promoters/promoter groups and a specific promoter/promoter group wishes to undergo re-classification.

5. Where the shares are transferred by way of transmission/succession/inheritance/gift by the promoters.

In case of reclassification from Public to Promoter, one shall require to make an open offer in accordance with the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

APPLICATION FOR RECLASSIFICATION

The application for reclassification by the listed entity in the above said 5 scenarios shall be made as per the following uniform procedure:

(A) Application by promoter to listed entity for re-classification.

(B) Disclosure regarding receipt of application for re-classification shall be made by company to stock exchange.

(C) Placing request of promoter before Board of Listed Entity for its positive or negative views.

(D) Based on Positive recommendation of Board, general meeting shall be called, for shareholders’ approval, with a time gap of atleast 6 months (a cooling off period) after the date of board meeting.

(E) Disclosure regarding dispatch of notice to shareholders shall be made by company to stock exchange

(F) Approval by Shareholders through ordinary resolution in all cases as presently it is required in limited cases.

It has also been suggested, in order to avoid conflict of interest that the specific promoter who has requested such reclassification, its promoter group and persons acting in concert shall not be permitted to vote on such resolution.

(G) Listed entities shall apply to Stock exchange for the same, subject to the condition that it shall be compliant entity in the manner prescribed.

(H) On being satisfied with the compliance of conditions mentioned in this regulation, Stock Exchange can allow modification or re-classification. Further, Joint decision shall be made by all the Stock Exchanges, in case entity is listed on more than one Stock Exchange.

(I) Disclosure regarding submission of decision of stock exchange made regarding the application to stock exchange.

APPLICABLE CONDITIONS

The specific promoter, its promoter group and the Persons Acting in Concert would be required to follow following uniform set of conditions proposed:

·        On the date of application for re-classification, holding shall be less than or equivalent to 10% of voting power in listed entity. A specific person/entity therein (classified as a “specific promoter”), its promoter group and PACs cumulatively hold less than 5% of the aggregate shareholding and voting rights;

·        Increase in the level of public shareholding pursuant to re-classification of promoter shall not be counted towards achieving compliance with minimum public shareholding requirement under rule 19A of the Securities Contracts (Regulation) Rules, 1957, and the provisions of these regulations.

·        No control over the affairs of listed entity directly or indirectly.

·        No special right through any arrangements or agreements and all shareholding agreements granting special rights to such entities shall have been terminated

·        Neither acting on Board of entity nor in the management (including not having a nominee director)

·        Name of promoter not to be included in the list of wilful defaulters as per RBI Guidelines

Further, the Board may relax any condition for re-classification in specific cases, if it is satisfied about non-exercise of control by the outgoing promoter or its persons acting in concert.

CHANGES IN THE  EXISTING FRAMEWORK

The Board has made changes in the following existing framework:

·        Application to Stock Exchanges can be made only by listed entity not directly by promoter

·        Cooling period of 6 months post Board meeting is prescribed.

·        Approval of shareholders has been recommended in all scenarios

·        The promoters are restricted to continue to have any special rights through formal or informal arrangements and all such agreements shall be terminated post-re-classification.

·        The promoters and their relatives are restricted to act as KMP for a period of more than three years from the date of shareholders’ approval subject to the approval for such promoter to act as KMP has been granted by the specific resolution of the said shareholders’ meeting

·        The promoters along with the promoter group and the Persons Acting in Concert are required not hold more than 1% paid-up equity capital of the entity including any holding of convertibles/outstanding warrants/ Depository Receipts in scenario 2 mentioned above. However, the limit of 1% of paid-up share capital is too low to be able to classify the promoters from holding the entity. Hence, the Committee has suggested to merits an increase to 10% as even after ceasing to be in control.

·        The scenario 3 and 4 mentioned above has been introduced by the Committee to build a mechanism to enable such re-classification to ensure persons, who may have been promoters but are no longer in the day-to-day control and management and have a low shareholding, should also have the option to be reclassified.

Hope the information will assist you in your Professional endeavours.

Note:

1. DEFINITION OF PROMOTERS

The Promoters are the persons who are having control over the affairs of the Company. They are the ones who have taken steps to bring the company into existence and are ultimately responsible for the kind of the company, presently it is.

Under the Companies Act, 1956, the term promoter, though used, was not defined. However, the Companies Act, 2013 has defined it under section 2(69).

·        who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92; or

·        who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or

·        in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act except in professional capacity

Hence, one of the important element which classify a person as a promoter of a company is control. The term control as defined in Regulation 2(1)(e) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011:

DEFINITION OF CONTROL

Control includes the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner: provided that a director or officer of a target company shall not be considered to be in control over such target company, merely by virtue of holding such position.

Therefore, it can be said that promoters are person with greater obligations under various legislative provisions and it is important to classify the persons into promoter and public category.

Courtesy :  CS Auyush Jain