The weekly messenger | Edition 20.18

Accounting News

FASB Issues ASU 2018-06 – Codification Improvements to Topic 942, Financial Services – Depository and Lending – 7 May 2018

The Financial Accounting Standard Board (FASB) has issued an Accounting Standard Update (ASU) - Codification Improvements to Topic 942, Financial Services – Depository and Lending in order to supersede the guidance given in Subtopic 740 of the aforesaid topic, that is related to Circular 202 ‘Accounting for Net Deferred Tax Charges’ because that guidance has been rescinded by the Office of the Comptroller of the Currency (OCC) and is no longer relevant. However, a cross reference between Subtopic 70-30, Income Taxes – Other Considerations or Special Areas, and Subtopic 942-740 has been added to the remaining guidance in Subtopic 740-30 in order to improve the usefulness of the Codification. These amendments would not have any effect on the reporting entities.

The amendments of this Update are effective from immediate effect i.e. from the date of issuance of this Update.

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Regulatory News

Companies (Prospectus and Allotment of Securities) Amendment Rules, 2018 – 7 May 2018

The Central Government (CG) has amended the Companies (Prospectus and Allotment of Securities) Rules, 2014 with the Companies (Prospectus and Allotment of Securities) Amendment Rules 2018 wherein the CG has omitted the following rules as clauses w.r.t. same in sub-section(1) of section 26 ‘Matters to be stated in prospectus’ has been omitted by the Companies (Amendment) Act, 2017:

• Rule 3 ‘Information to be stated in the prospectus’;
• Rule 4 ‘Reports to be set out in the Prospectus’;
• Rule 5 ‘Other matters and reports to be stated in the prospectus’ ; and
• Rule 6 ‘Period for which information to be provided in certain cases’.

These rules shall come into force from the date of their publication in the Official Gazette i.e. 7 May 2018.

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Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2018 – 7 May 2018

The CG has amended the Companies (Appointment and Qualification of Directors) Rules, 2014 with the Companies (Appointment and Qualification of Directors) Second Amendment Rules 2018 wherein the following changes have been made:

• Existing Rule 5 which relates to ‘Qualification of independent director’ has been renumbered as sub – rule (1) of Rule 5;
• After sub-rule (1), a new sub-rule (2) has also been added which provides the limits/amounts up to which the relative of the independent director can be indebted to the company its holding, subsidiary or associate company or their promoters, or directors; or can give guarantee security in connection with the indebtedness of any third person to the company, its holding, subsidiary or associate company or their promoters, or directors of such holding company. This change has been made pursuant to the amendment in the Companies (Amendment) Act, 2017;
• In Rule 16 which deals with ‘Copy of resignation of director to be forwarded by director’, the word ‘shall’ has been replaced with the word ‘may’ which means that now the director who resigns from his office is not compulsorily required to file his resignation with the registrar within thirty days from the date of the resignation.

These rules shall come into force from the date of their publication in the Official Gazette i.e. 7 May 2018.

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Companies (Meetings of Board and its Powers) Amendment Rules, 2018 – 7 May 2018

The CG has amended the Companies (Meetings of Board and its Powers) Rules, 2014 with the Companies (Meetings of Board and its Powers) Amendment Rules 2018 wherein the following changes have been made:

• In Rule 4 which deals with ‘Matters not to be dealt with in a meeting through video conferencing or other audio visual means’ a proviso has been added which read as follows: “Provided that where there is quorum in a meeting through physical presence of directors, any other director may participate through video conferencing or other audio visual means”;
• In Rule 6 ‘Committees of the Board’ which provides the list of companies which shall constitute an Audit Committee and a Nomination and Remuneration Committee of the Board, the word ‘every listed company’ has been replaced with the word ‘every listed public company’;
• In Rule 13 which deals with ‘Special Resolution’, the requirement given in sub-rule (1) that if the aggregate amount of loans and investments so far made, the amount for which guarantee or security so far provided or proposed to be made or provided exceeds the limits specified in section 186 shall be previously authorised by passing a special resolution in a general meeting has now been deleted from the rules as the same has been added in sub section (3) of section 186 of the Companies Act, 2013 as amended by Companies (Amendment) Act, 2017.

These rules shall come into force from the date of their publication in the Official Gazette i.e. 7 May 2018.

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Companies (Audit and Auditors) Amendment Rules, 2018 – 7 May 2018

The CG has amended the Companies (Audit and Auditors) Rules, 2014 with the Companies (Audit and Auditors) Amendment Rules, 2018 wherein the following changes have been made:

• In Rule 3 which deals with the ‘Manner and procedure of selection and appointment of auditors’, the explanation which says that if the appointment of the auditor is not ratified by the members of the company, the BOD shall appoint another auditor after following the due procedures has been omitted as the same requirement has been done away with by the Companies (Amendment) Act, 2017. Similar provision as mentioned in a proviso to sub-rule 7 of rule 3 has also been omitted;
• Rule 9 which deals with ‘Liability to devolve on concerned partners only’ has been omitted as the same has been added as a proviso to section 147(5) of the Companies Act, 2013 by the Companies (Amendment) Act, 2017.
• In Rule 10A which states that for section 143(3)(i), the auditor’s report shall state about existence of adequate internal financial controls system and its operating effectiveness, the words ‘adequate internal financial controls system’ has been replaced with the words ‘internal financial controls with reference to financial statements’ as the same has been amended by the Companies (Amendment) Act, 2017.
• In Rule 14 which deals with ‘Remuneration of the Cost Auditor’, the words ‘who is a cost accountant in practice’ have been replaced by the words ‘who is a cost accountant’ pursuant to the Companies (Amendment) Act, 2017.

These rules shall come into force from the date of their publication in the Official Gazette i.e. 7 May 2018.

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Companies (Specification of Definitions Details) Amendment Rules, 2018 – 7 May 2018

The CG has amended the Companies (Specification of Definition Details) Rules, 2014 with the Companies (Specification of Definition Details) Amendment Rules 2018 wherein it has omitted the clause (r) of sub-rule (1) of Rule 2 which provides the definition of ‘Total Share Capital’ for the purposes of clause (6) (definition of associate company) and clause (87) (definition of subsidiary company) of section 2 of the Companies Act, 2013 as the Companies Act 2017 has replaced the words ‘total share capital’ with ‘total voting power’ in the aforesaid definitions.

These rules shall come into force from the date of their publication in the Official Gazette i.e. 7 May 2018.

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Companies (Registration Offices and Fees) Second Amendment Rules, 2018 – 7 May 2018

The CG has amended the Companies (Registration Offices and Fees) Rules, 2014 with the Companies (Registration Offices and Fees) Second Amendment Rules 2018 wherein it has made the following changes:

• In Rule 10 ‘Procedure on receipt of any application or form or document electronically’, earlier there was a proviso to sub rule (3) which states that the resubmission of the application is not allowed in case of reservation of a name through web service – RUN. Now, this proviso has been substituted with the following proviso “Provided that Registrar shall allow fifteen days time for re-submission in case of reservation of a name through web services – RUN for rectification of defects, if any.”
• In Annexure, in item I (Fee for filing under section 403 of the Companies Act, 2013), the table given under sub item B (Table of additional fees applicable for delay in filing of forms in certain scenarios) has been substituted with the new table and after sub-item C, a new sub-item i.e. sub-item D ‘For Forms under section 92 or 137’ has also been inserted.

These rules shall come into force from the date of their publication in the Official Gazette i.e. 7 May 2018.

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Companies (Share Capital and Debentures) Second Amendment Rules, 2018 – 7 May 2018

The CG has amended the Companies (Share Capital and Debentures) Rules, 2014 with the Companies (Share Capital and Debentures) Second Amendment Rules 2018 wherein it has made amendment in Rule 8 ‘Issue of sweat equity shares’. Earlier in the term ‘Employee’ which was defined in explanation to Rule 8(1), it was mentioned that “Employee means a permanent employee of the company who has been working in India or outside India, for atleast last one year. Now, the words ‘for atleast last one year’ have been omitted which means that now a company other than a listed company may issue sweat issue shares to the permanent employees even if they have not completed one year with the company subject to the fulfilment of the prescribed conditions.

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Commencement of certain sections of Companies Act 2017 – 7 May 2018

The CG has appointed 7 May 2018 as the date on which the various other sections of the Companies (Amendment) Act, 2017 shall come into force. These mainly relates to:

• Clause (i) and (xiii) of Section 2 ‘Definitions’;
• Section 8 i.e. amendment of Section 26 ‘Matters to be stated in prospectus’;
• Section 13 i.e. amendment of section 54 ‘Issue of sweat equity shares’;
• Section 18 i.e. amendment of section 77 ‘Duty to register charges, etc.’;
• Section 19 i.e. amendment of section 78 ‘Application for registration of charge’;
• Clauses (i) and (ii) of Section 21 i.e. amendment of section 89 ‘Declaration in respect of beneficial interest in any share’;
• Clauses (iii) and (iv) of Section 23 i.e. amendment of section 92 ‘Annual Return’;
• Section 30 i.e. amendment of section 117 ‘Resolutions and agreements to be filed’;
• Section 31 i.e. amendment of section 121 ‘Report on annual general meeting’;
• Section 33 i.e. amendment of section 129 ‘Financial Statement’
• Section 39 i.e. amendment of section 137 ‘Copy of financial statement to be filed with Registrar’
• Section 40 i.e. amendment of section 139 ‘Appointment of auditors’ etc.

These rules shall come into force from the date of their publication in the Official Gazette i.e.

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SEBI (LODR) (Amendment) Regulations, 2018 – 9 May 2018

The Securities and Exchange Board of India (SEBI) has amended the SEBI (Listing Obligations and Disclosure Requirements (LODR)) Regulations, 2015 with the SEBI (LODR) (Amendment) Regulations, 2018 wherein certain changes have been made in the some of the existing regulations and also some new regulations have also been inserted. These mainly relates to:

• Regulation 2 (1)(zb) ‘Definition of Related Party’;
• Regulation 15 ‘Applicability’;
• Regulation 16 ‘Definitions’;
• Regulation 17 ‘Board of Directors’;
• Regulation 17 A ‘Maximum number of directorships’(newly inserted);
• Regulation 23 ‘Related party transactions’;
• Regulation 24 ‘Corporate governance requirements with respect to subsidiary of listed entity’;
• Regulation 24A ‘Secretarial Audit’ (newly inserted);
• Regulation 25 ‘Obligations with respect to independent directors’;
• Regulation 33 ‘Financial Results’;
• Regulation 34 ‘Annual Report’;
• Regulation 36 ‘Documents & Information to shareholders’;
• Regulation 46 ‘Website’; etc.

For more information, click here.