Companies specification of definitions details rules 2014

By | May 5, 2016
(Last Updated On: May 5, 2016)

RULES FRAMED UNDER COMPANIES ACT, 2013

CHAPTER I : PRELIMINARY

COMPANIES (SPECIFICATION OF DEFINITIONS DETAILS) RULES, 2014

In exercise of the powers conferred under sub-clause (ix) of clause (76), sub-clause (iii) of clause (77) of section 2, read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called the Companies (Specification of Definitions Details) Rules, 2014.

(2) They shall come into force on the date of their publication in the Official Gazette.

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Certifying Authority” for the purpose of Digital Signature Certificate means a person who has been granted a licence to issue a Digital Signature Certificate under section 24 of the Information Technology Act, 2000 (21 of 2000) and the Certified Filing Centre (CFC) under the Act;
(c)“digital signature” means the digital signature as defined under clause (p) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);
(d)“Digital Signature Certificate” means a Digital Signature Certificate as defined under clause (q) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);
(e)“Director Identification Number” (DIN) means an identification number allotted by the Central Government to any individual, intending to be appointed as director or to any existing director of a company, for the purpose of his identification as a director of a company :
Provided that the Director Identification Number (DIN) obtained by the individuals prior to the notification of these rules shall be the DIN for the purpose of the Companies Act, 2013 :
Provided further that “Director Identification Number” (DIN) includes the Designated Partnership Identification Number (DPIN) issued under section 7 of the Limited Liability Partnership Act, 2008 (6 of 2009) and the rules made thereunder;
(f)“e-Form” means a form in the electronic form as prescribed under the Act or the rules made thereunder and notified by the Central Government under the Act;
(g)“electronic Mail” means the message sent, received or forwarded in digital form using any electronic communication mechanism that the message so sent, received or forwarded is storable and retrievable;
(h)“electronic mode”, for the purposes of clause (42) of section 2 of the Act, means carrying out electronically based, whether main server is installed in India or not, including, but not limited to—
(i)business to business and business to consumer transactions, data interchange and other digital supply transactions;
(ii)offering to accept deposits or inviting deposits or accepting deposits or subscriptions in securities, in India or from citizens of India;
(iii)financial settlements, web based marketing, advisory and transactional services, database services and products, supply chain management;
(iv)online services such as telemarketing, telecommuting, telemedicine, education and information research; and
(v)all related data communication services,
whether conducted by e-mail, mobile devices, social media, cloud computing, document management, voice or data transmission or otherwise;
(i)“electronic record” means the electronic record as defined under clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000;
(j)“electronic Registry” means an electronic repository or storage system of the Central Government in which the information or documents are received, stored, protected and preserved in electronic form;
(k)“Executive Director” means a whole time director as defined in clause (94) of section 2 of the Act;
(l)“Fees” means the fees as specified in the Companies (Registration Offices and Fees) Rules, 2014;
(m)“Form” means a form set forth in the Act or the rules made thereunder which shall be used for the matter to which it relates;
(n)“Pre-fill” means the automated process of data input by the computer system from the database maintained in electronic registry of the Central Government;
(o)“Registrar’s Front Office” means an office maintained by the Central Government or an agency authorised by it to facilitate e-filing of documents into the electronic registry and their inspection and viewing;
(p)“Regional Director” means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional Director;
(q)“section” means the section of the Act;
(r)“Total Share Capital”, for the purposes of clause (6) and clause (87) of section 2, means the aggregate of the—
(a)paid-up equity share capital; and
(b)convertible preference share capital;
(s)For the purposes of clause (d) of sub-section (1) of section 164 and clause (f) of sub-section (1) of section 167 of the Act, “or otherwise” means any offence in respect of which he has been convicted by a Court under this Act or the Companies Act, 1956;

(2) The words and expressions used in these rules but not defined and defined in the Act or in (i) the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or (ii) the Securities and Exchange Board of India Act, 1992 (15 of 1992) or (iii) the Depositories Act, 1996 (22 of 1996) or (iv) the Information Technology Act, 2000 (21 of 2000) or rules and regulations made thereunder shall have the meanings respectively assigned to them under the Act or those Acts.

Related party.

3. For the purposes of sub-clause (ix) of clause (76) of section 2 of the Act, a director or key managerial personnel of the holding company or his relative with reference to a company, shall be deemed to be a related party.

List of relatives in terms of clause (77) of section 2.

4. A person shall be deemed to be the relative of another, if he or she is related to another in the following manner, namely:—

(1)Father :
Provided that the term “Father” includes step-father.
(2)Mother :
Provided that the term “Mother” includes the step-mother.
(3)Son :
Provided that the term “Son” includes the step-son.
(4)Son’s wife.
(5)Daughter.
(6)Daughter’s husband.
(7)Brother :
Provided that the term “Brother” includes the step-brother;
(8)Sister :
Provided that the term “Sister” includes the step-sister.

CHAPTER II : INCORPORATION OF COMPANY AND MATTERS INCIDENTAL THERETO

COMPANIES (INCORPORATION) RULES, 2014

In exercise of the powers conferred under section 3, section 4, sub-sections (5) and (6) of section 5, section 6, sub-sections (1) and (2) of section 7, sub-sections (1) and (2) of section 8, clauses (a) and (b) of sub-section (1) of section 11, sub-sections (2), (3), (4) and (5) of section 12, sub-sections (3), (4) and proviso to sub-section (5) of section 13, sub-section (2) of section 14, sub-section (1) of section 17, sub-sections (1) and (2) of section 20 read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013) and in supersession of the Companies (Central Government’s) General Rules and Forms, 1956 or any other relevant rules prescribed under the Companies Act, 1956 (1 of 1956) on matters covered under these rules, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called the Companies (Incorporation) Rules, 2014.

(2) They shall come into force on the Ist day of April, 2014.

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Annexure” means the Annexure to these rules;
(c)“Form” or “e-Form” means a form in the electronic form or non-electronic form as specified under the Act or Rules made thereunder and notified by the Central Government under the Act;
(d)“Fees” means fees as specified in the Companies (Registration Offices and Fees) Rules, 2014;
(e)“Regional Director” means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional Director;
(f)“section” means the section of the Act;

(2) Words and expressions used in these rules but not defined and defined in the Act or in Companies (Specification of Definitions Details) Rules, 2014 shall have the meanings respectively assigned to them in the Act and said rules.

One Person Company.

3. (1) Only a natural person who is an Indian citizen and resident in India—

(a)shall be eligible to incorporate a One Person Company;
(b)shall be a nominee for the sole member of a One Person Company.

Explanation.—For the purposes of this rule, the term “resident in India” means a person who has stayed in India for a period of not less than one hundred and eighty two days during the immediately preceding one calendar year.

(2) No person shall be eligible to incorporate more than a One Person Company or become nominee in more than one such company.

(3) Where a natural person, being member in One Person Company in accordance with this rule becomes a member in another such Company by virtue of his being a nominee in that One Person Company, such person shall meet the eligibility criteria specified in sub-rule (2) within a period of one hundred and eighty days.

(4) No minor shall become member or nominee of the One Person Company or can hold share with beneficial interest.

(5) Such Company cannot be incorporated or converted into a company under section 8 of the Act.

(6) Such Company cannot carry out Non-Banking Financial Investment activities including investment in securities of any body corporates.

(7) No such company can convert voluntarily into any kind of company unless two years have expired from the date of incorporation of One Person Company, except threshold limit (paid up share capital) is increased beyond fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees.

Nomination by the subscriber or member of One Person Company.

4. For the purposes of first proviso to sub-section (1) of section 3—

(1)The subscriber to the memorandum of a One Person Company shall nominate a person, after obtaining prior written consent of such person, who shall, in the event of the subscriber’s death or his incapacity to contract, become the member of that One Person Company.
(2)The name of the person nominated under sub-rule (1) shall be mentioned in the memorandum of One Person Company and such nomination in Form No. INC. 2 along with consent of such nominee obtained in Form No. INC. 3 and fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 shall be filed with the Registrar at the time of incorporation of the company along with itsmemorandum and articles.
(3)The person nominated by the subscriber or member of a One Person Company may, withdraw his consent by giving a notice in writing to such sole member and to the One Person Company :
Provided that the sole member shall nominate another person as nominee within fifteen days of the receipt of the notice of withdrawal and shall send an intimation of such nomination in writing to the Company, along with the written consent of such other person so nominated in Form No. INC. 3.
(4)The company shall within thirty days of receipt of the notice of withdrawal of consent under sub-rule (3) file with the Registrar, a notice of such withdrawal of consent and the intimation of the name of another person nominated by the sole member in Form No. INC. 4 along with fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 and the written consent of such another person so nominated in Form No. INC. 3.
(5)The subscriber or member of a One Person Company may, by intimation in writing to the company, change the name of the person nominated by him at any time for any reason including in case of death or incapacity to contract of nominee and nominate another person after obtaining the prior consent of such another person in Form No. INC. 3 :
Provided that the company shall, on the receipt of such intimation, file with the Registrar, a notice of such change in Form No. INC.4 along with fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 and with the written consent of the new nominee in Form No. INC. 3 within thrity days of receipt of intimation of the change.
(6)Where the sole member of One Person Company ceases to be the member in the event of death or incapacity to contract and his nominee becomes the member of such One Person Company, such new member shall nominate within fifteen days of becoming member, a person who shall in the event of his death or his incapacity to contract become the member of such company, and the company shall file with the Registrar an intimation of such cessation and nomination in Form No. INC. 4 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 within thirty days of the change in membership and with the prior written consent of the person so nominated in Form No. INC. 3.

Penalty.

5. If One Person Company or any officer of such company contravenes the provisions of these rules, One Person Company or any officer of the One Person Company shall be punishable with fine which may extend to ten thousand rupees and with a further fine which may extend to one thousand rupees for every day after the first during which such contravention continues.

One Person Company to convert itself into a public company or a private company in certain cases.

6. (1) Where the paid up share capital of an One Person Company exceeds fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees, it shall cease to be entitled to continue as a One Person Company.

(2) Such One Person Company shall be required to convert itself, within six months of the date on which its paid up share capital is increased beyond fifty lakh rupees or the last day of the relevant period during which its average annual turnover exceeds two crore rupees as the case may be, into either a private company with minimum of two members and two directors or a public company with at least of seven members and three directors in accordance with the provisions of section 18 of the Act.

(3) The One Person Company shall alter its memorandum and articles by passing a resolution in accordance with sub-section (3) of section 122 of the Act to give effect to the conversion and to make necessary changes incidental thereto.

(4) The One Person Company shall within period of sixty days from the date of applicability of sub-rule (1), give a notice to the Registrar in Form No. INC. 5 informing that it has ceased to be a One Person Company and that it is now required to convert itself into a private company or a public company by virtue of its paid up share capital or average annual turnover, having exceeded the threshold limit laid down in sub-rule (1).

Explanation.—For the purposes of this rule,- “relevant period” means the period of immediately preceding three consecutive financial years.

(5) If One Person Company or any officer of the One Person Company contravenes the provisions of these rules, One Person Company or any officer of the One Person Company shall be punishable with fine which may extend to ten thousand rupees and with a further fine which may extend to one thousand rupees for every day after the first during which such contravention continues.

(6) A One Person company can get itself converted into a Private or Public company after increasing the minimum number of members and directors to two or minimum of seven members and two or three directors as the case may be, and by maintaining the minimum paid-up capital as per requirements of the Act for such class of company and by making due compliance of section 18 of the Act for conversion.

Conversion of private company into One Person Company.

7. (1) A private company other than a company registered under section 8 of the Act having paid up share capital of fifty lakhs rupees or less or average annual turnover during the relevant period is two crore rupees or less may convert itself into one person company by passing a special resolution in the general meeting.

(2) Before passing such resolution, the company shall obtain No objection in writing from members and creditors.

(3) The one person company shall file copy of the special resolution with the Registrar of Companies within thirty days from the date of passing such resolution in Form No. MGT.14.

(4) The company shall file an application in Form No. INC. 6 for its conversion into One Person Companyalong with fees as provided in the Companies (Registration Offices and Fees) Rules, 2014, by attaching the following documents, namely:—

(i)the directors of the company shall give a declaration by way of affidavit duly sworn in confirming that all members and creditors of the company have given their consent for conversion, the paid up share capital company is fifty lakhs rupees or less or average annual turnover is less than two crores rupees, as the case may be;
(ii)the list of members and list of creditors;
(iii)the latest Audited Balance Sheet and the Profit and Loss Account; and
(iv)the copy of No Objection letter of secured creditors.

(5) On being satisfied and complied with requirements stated herein the Registrar shall issue the Certificate.

Undesirable names.

8. (1) In determining whether a proposed name is identical with another, the differences on account of the following shall be disregarded—

(a)the words like Private, Pvt, Pvt., (P), Limited, Ltd, Ltd., LLP, Limited Liability Partnership;
(b)words appearing at the end of the names—company, and company, co., co, corporation, corp, corpn, corp.;
(c)plural version of any of the words appearing in the name;
(d)type and case of letters, spacing between letters and punctuation marks;
(e)joining words together or separating the words does not make a name distinguishable from a name that uses the similar, separated or joined words;
(f)use of a different tense or number of the same word does not distinguish one name from another;
(g)using different phonetic spellings or spelling variations shall not be considered as distinguishing one name from another. Illustration (For example, P.Q. Industries limited is existing then P and Q Industries or Pee Que Industries or P n Q Industries or P & Q Industries shall not be allowed and similarly if a name contains numeric character like 3, resemblance shall be checked with ‘Three’ also;)
(h)misspelled words, whether intentionally misspelled or not, do not conflict with the similar, properly spelled words;
(i)the addition of an internet related designation, such as .com, .net, .edu, .gov, .org, .in does not make a name distinguishable from another, even where (.) is written as ‘dot’;
(j)the addition of words like New, Modern, Nav, Shri, Sri, Shree, Sree, Om, Jai, Sai, The, etc. does not make a name distinguishable from an existing name and similarly, if it is different from the name of the existing company only to the extent of adding the name of the place, the same shall not be allowed; such names may be allowed only if no objection from the existing company by way of Board resolution is submitted;
(k)different combination of the same words does not make a name distinguishable from an existing name,e.g., if there is a company in existence by the name of “Builders and Contractors Limited”, the name “Contractors and Builders Limited” shall not be allowed unless it is change of name of existing company;
(l)if the proposed name is the Hindi or English translation or transliteration of the name of an existing company or limited liability partnership in English or Hindi, as the case may be.

(2) (a) The name shall be considered undesirable, if—

(i)it attracts the provisions of section 3 of the Emblems and Names (Prevention and Improper Use) Act, 1950 (12 of 1950);
(ii)it includes the name of a registered trade mark or a trade mark which is subject of an application for registration, unless the consent of the owner or applicant for registration, of the trade mark, as the case may be, has been obtained and produced by the promoters;
(iii)it includes any word or words which are offensive to any section of the people;

(b) The name shall also be considered undesirable, if—

(i)the proposed name is identical with or too nearly resembles the name of a limited liability partnership;
(ii)it is not in consonance with the principal objects of the company as set out in the memorandum of association :
Provided that every name need not be necessarily indicative of the objects of the company, but when there is some indication of objects in the name, then it shall be in conformity with the objectsmentioned in the memorandum;
(iii)the company’s main business is financing, leasing, chit fund, investments, securities or combination thereof, such name shall not be allowed unless the name is indicative of such related financial activities, viz., Chit Fund or Investment or Loan, etc.;
(iv)it resembles closely the popular or abbreviated description of an existing company or limited liability partnership;
(v)the proposed name is identical with or too nearly resembles the name of a company or limited liability partnership incorporated outside India and reserved by such company or limited liability partnership with the Registrar :
Provided that if a foreign company is incorporating its subsidiary company in India, then the original name of the holding company as it is may be allowed with the addition of word India or name of any Indian state or city, if otherwise available;
(vi)any part of the proposed name includes the words indicative of a separate type of business constitution or legal person or any connotation thereof e.g. co-operative, sehkari, trust, LLP, partnership, society, proprietor, HUF, firm, Inc., PLC, GmbH, SA, PTE, Sdn, AG etc.;
Explanation.—For the purposes of this sub-clause, it is hereby clarified that the name including phrase‘Electoral Trust’ may be allowed for Registration of companies to be formed under section 8 of the Act, in accordance with the Electoral Trusts Scheme, 2013 notified by the Central Board of Direct Taxes (CBDT) :
Provided that name application is accompanied with an affidavit to the effect that the name to be obtained shall be only for the purpose of registration of companies under Electoral Trust Scheme as notified by the Central Board of Direct Taxes;
(vii)the proposed name contains the words ‘British India’;
(viii)the proposed name implies association or connection with embassy or consulate or a foreign government;
(ix)the proposed name includes or implies association or connection with or patronage of a national hero or any person held in high esteem or important personages who occupied or are occupying important positions in Government;
(x)the proposed name is vague or an abbreviated name such as ‘ABC limited’ or ’23K limited’ or ‘DJMO’ Ltd: abbreviated name based on the name of the promoters will not be allowed. For example:- BMCD Limited representing first alphabet of the name of the promoter like Bharat, Mahesh, Chandan and David :
Provided that existing company may use its abbreviated name as part of the name for formation of a new company as subsidiary or joint venture or associate company but such joint venture or associated company shall not have an abbreviated name only e.g. Delhi Paper Mills Limited can get a joint venture or associated company as DPM Papers Limited and not as DPM Limited :
Provided further that the companies well known in their respective field by abbreviated names are allowed to change their names to abbreviation of their existing name after following the requirements of the Act;
(xi)the proposed name is identical to the name of a company dissolved as a result of liquidation proceeding and a period of two years have not elapsed from the date of such dissolution :
Provided that if the proposed name is identical with the name of a company which is struck off in pursuance of action under section 248 of the Act, then the same shall not be allowed before the expiry of twenty years from the publication in the Official Gazette being so struck off;
(xii)it is identical with or too nearly resembles the name of a limited liability partnership in liquidation or the name of a limited liability partnership which is struck off up to a period of five years;
(xiii)the proposed name include words such as ‘Insurance’, ‘Bank’, ‘Stock Exchange’, ‘Venture Capital’, ‘Asset Management’, ‘Nidhi’, ‘Mutual fund’ etc., unless a declaration is submitted by the applicant that the requirements mandated by the respective regulator, such as IRDA, RBI, SEBI, MCA etc. have been complied with by the applicant;
(xiv)the proposed name includes the word “State”, the same shall be allowed only in case the company is a government company;
(xv)the proposed name is containing only the name of a continent, country, state, city such as Asia limited, Germany Limited, Haryana Limited, Mysore Limited;
(xvi)the name is only a general one, like Cotton Textile Mills Ltd. or Silk Manufacturing Ltd., and not Lakshmi Silk Manufacturing Co. Ltd.;
(xvii)it is intended or likely to produce a misleading impression regarding the scope or scale of its activities which would be beyond the resources at its disposal;
(xviii)proposed name includes name of any foreign country or any city in a foreign country, the same shall be allowed if the applicant produces any proof of significance of business relations with such foreign country like Memorandum Of Understanding with a company of such country :
Provided that the name combining the name of a foreign country with the use of India like India Japan or Japan India shall be allowed if, there is a government to government participation or patronage and no company shall be incorporated using the name of an enemy country.
Explanation.—For the purposes of this clause, enemy country means so declared by the Central Government from time to time.

(3) If any company has changed its activities which are not reflected in its name, it shall change its name in line with its activities within a period of six months from the change of activities after complying with all the provisions as applicable to change of name.

(4) In case the key word used in the name proposed is the name of a person other than the name(s) of the promoters or their close blood relatives, No objection from such other person(s) shall be attached with the application for name. In case the name includes the name of relatives, the proof of relation shall be attached and it shall be mandatory to furnish the significance and proof thereof for use of coined words made out of the name of the promoters or their relatives.

(5) The applicant shall declare in affirmative or negative (to affirm or deny) whether they are using or have been using in the last five years , the name applied for incorporation of company or LLP in any other business constitution like Sole proprietor or Partnership or any other incorporated or unincorporated entity and if, yes details thereof and No Objection Certificate from other partners and associates for use of such name by the proposed Company or LLP, as the case may be, and also a declaration as to whether such other business shall be taken over by the proposed company or LLP or not.

(6) The following words and combinations thereof shall not be used in the name of a company in English or any of the languages depicting the same meaning unless the previous approval of the Central Government has been obtained for the use of any such word or expression—

(a)Board;
(b)Commission;
(c)Authority;
(d)Undertaking;
(e)National;
(f)Union;
(g)Central;
(h)Federal;
(i)Republic;
(j)President;
(k)Rashtrapati;
(l)Small Scale Industries;
(m)Khadi and Village Industries Corporation;
(n)Financial, forest, Corporation and the like;
(o)Municipal;
(p)Panchayat;
(q)Development Authority;
(r)Prime Minister or Chief Minister;
(s)Minister;
(t)Nation;
(u)Forest corporation;
(v)Development Scheme;
(w)Statute or Statutory;
(x)Court or Judiciary;
(y)Governor;
(z)Development Scheme or the use of word Scheme with the name of Government(s), State, India, Bharat or any government authority or in any manner resembling with the schemes launched by Central, state or local Governments and authorities; and
(za)Bureau.

(7) For the Companies under section 8 of the Act, the name shall include the words foundation, Forum, Association, Federation, Chambers, Confederation, council, Electoral trust and the like etc. Every company incorporated as a “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name.

(8) The names released on change of name by any company shall remain in data base and shall not be allowed to be taken by any other company including the group company of the company who has changed the name for a period of three years from the date of change subject to specific direction from the competent authority in the course of compromise, arrangement and amalgamation.

9. Reservation of name.

An application for the reservation of a name shall be made in Form No. INC.1 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014.

10. Where the articles contain the provisions for entrenchment, the company shall give notice to the Registrar of such provisions in Form No. INC. 2 or Form No. INC. 7, as the case may be, along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 at the time of incorporation of the company or in case of existing companies, the same shall be filed in Form No. MGT. 14 within thirty days from the date of entrenchment of the articles, as the case may be, along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014.

11. The model articles as prescribed in Tables F, G, H, I and J of Schedule I may be adopted by a company as may be applicable to the case of the company, either in totality or otherwise.

Application for incorporation of companies.

12. An application shall be filed, with the Registrar within whose jurisdiction the registered office of the company is proposed to be situated, in Form No.INC.2 (for One Person Company) and Form No. INC.7 (other than One Person Company) along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 for registration of a company.

Signing of memorandum and articles.

13. The Memorandum and Articles of Association of the company shall be signed in the following manner, namely:—

(1)The memorandum and articles of association of the company shall be signed by each subscriber to thememorandum, who shall add his name, address, description and occupation, if any, in the presence of at least one witness who shall attest the signature and shall likewise sign and add his name, address, description and occupation, if any and the witness shall state that “I witness to subscriber/subscriber(s), who has/have subscribed and signed in my presence (date and place to be given); further I have verified his or their Identity Details (ID) for their identification and satisfied myself of his/her/their identification particulars as filled in”.
(2)Where a subscriber to the memorandum is illiterate, he shall affix his thumb impression or mark which shall be described as such by the person, writing for him, who shall place the name of the subscriber against or below the mark and authenticate it by his own signature and he shall also write against the name of the subscriber, the number of shares taken by him.
(3)Such person shall also read and explain the contents of the memorandum and articles of association to the subscriber and make an endorsement to that effect on the memorandum and articles of association.
(4)Where the subscriber to the memorandum is a body corporate, the memorandum and articles of association shall be signed by director, officer or employee of the body corporate duly authorized in this behalf by a resolution of the board of directors of the body corporate and where the subscriber is a Limited Liability Partnership, it shall be signed by a partner of the Limited Liability Partnership, duly authorized by a resolution approved by all the partners of the Limited Liability Partnership :
Provided that in either case, the person so authorized shall not, at the same time, be a subscriber to thememorandum and articles of Association.
(5)Where subscriber to the memorandum is a foreign national residing outside India—
(a)in a country in any part of the Commonwealth, his signatures and address on the memorandumand articles of association and proof of identity shall be notarized by a Notary (Public) in that part of the Commonwealth;
(b)in a country which is a party to the Hague Apostille Convention, 1961, his signatures and address on the memorandum and articles of association and proof of identity shall be notarized before the Notary (Public) of the country of his origin and be duly apostillised in accordance with the said Hague Convention;
(c)in a country outside the Commonwealth and which is not a party to the Hague Apostille Convention, 1961, his signatures and address on the memorandum and articles of association and proof of identity, shall be notarized before the Notary (Public) of such country and the certificate of the Notary (Public) shall be authenticated by a Diplomatic or Consular Officer empowered in this behalf under section 3 of the Diplomatic and Consular Officers (Oaths and Fees) Act, 1948 (40 of 1948) or, where there is no such officer by any of the officials mentioned in section 6 of the Commissioners of Oaths Act, 1889 (52 and 53 Vic. C. (10), or in any Act amending the same;
(d)visited in India and intended to incorporate a company, in such case the incorporation shall be allowed if, he/she is having a valid Business Visa.

Explanation.—For the purposes of this clause, it is hereby clarified that, in case of Person is of Indian Origin or Overseas Citizen of India, requirement of business Visa shall not be applicable.

Declaration by professionals.

14. For the purposes of clause (b) of sub-section (1) of section 7, the declaration by an advocate, a Chartered Accountant, Cost accountant or Company Secretary in practice shall be in Form No. INC.8.

Explanation (i) “chartered accountant” means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (ii) “Cost Accountant” means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 and (iii) “company secretary” means a “company secretary” or “secretary” means as defined in clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980.

Affidavit from subscribers and first directors.

15. For the purposes of clause (c) of sub-section (1) of section 7, the affidavit shall be submitted by each of the subscribers to the memorandum and each of the first directors named in the articles in Form No. INC.9

Particulars of every subscriber to be filed with the Registrar at the time of incorporation.

16. (1) The following particulars of every subscriber to the memorandum shall be filed with the Registrar—

(a)Name (including surname or family name) and recent Photograph affixed and scan with MOA and AOA:
(b)Father’s/Mother’s/name:
(c)Nationality:
(d)Date of Birth:
(e)Place of Birth (District and State):
(f)Educational qualification:
(g)Occupation:
(h)Income-tax permanent account number:
(i)Permanent residential address and also Present address (Time since residing at present address and address of previous residence address(es) if stay of present address is less than one year) similarly the office/business addresses :
(j)Email id of Subscriber :
(k)Phone No. of Subscriber :
(l)Fax No. of Subscriber (optional)
Explanation.—Information related to (i) to (l) shall be of the individual subscriber and not of the professional engaged in the incorporation of the company;
(m)Proof of Identity:
For Indian Nationals:
PAN Card (mandatory) and any one of the following
Voter’s identity card
Passport copy
Driving License copy
Unique Identification Number (UIN)
For Foreign nationals and Non Resident Indians
Passport
(n)Residential proof such as Bank Statement,
Electricity Bill, Telephone/Mobile Bill :
Provided that Bank statement Electricity bill, Telephone or Mobile bill shall not be more than two months old;
(o)Proof of nationality in case the subscriber is a foreign national.
(p)If the subscriber is already a director or promoter of a company(s), the particulars relating to—
(i)Name of the company;
(ii)Corporate Identity Number;
(iii)Whether interested as a director or promoter;
(q)the specimen signature and latest photograph duly verified by the banker or notary shall be in the prescribed Form No. INC.10.

(2) Where the subscriber to the memorandum is a body corporate, then the following particulars shall be filed with the Registrar—

(a)Corporate Identity Number of the Company or Registration number of the body corporate, if any;
(b)GLN, if any;
(c)the name of the body corporate;
(d)the registered office address or principal place of business;
(e)E-mail Id;
(f)if the body corporate is a company, certified true copy of the board resolution specifying inter alia the authorization to subscribe to the memorandum of association of the proposed company and to make investment in the proposed company, the number of shares proposed to be subscribed by the body corporate, and the name, address and designation of the person authorized to subscribe to theMemorandum;
(g)if the body corporate is a limited liability partnership or partnership firm, certified true copy of the resolution agreed to by all the partners specifying inter alia the authorization to subscribe to thememorandum of association of the proposed company and to make investment in the proposed company, the number of shares proposed to be subscribed in the body corporate, and the name of the partner authorized to subscribe to the Memorandum;
(h)the particulars as specified above for subscribers in terms of clause (e) of sub-section (1) of section 7 for the person subscribing for body corporate;
(i)in case of foreign bodies corporate, the details relating to—
(i)the copy of certificate of incorporation of the foreign body corporate; and
(ii)the registered office address.

Particulars of first directors of the company and their consent to act as such.

17. The particulars of each person mentioned in the articles as first director of the company and his interest in other firms or bodies corporate along with his consent to act as director of the company shall be filed in Form No. DIR.12 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014.

Certificate of incorporation.

18. The Certificate of Incorporation shall be issued by the Registrar in Form No. INC.11.

License under section 8 for new companies with charitable objects etc.

19. (1) A person or an association of persons (hereinafter referred to in this rule as “the proposed company”), desirous of incorporating a company with limited liability under sub-section (1) of section 8 without the addition to its name of the word “Limited”, or as the case may be, the words “Private Limited”, shall make an application in Form No. INC.12 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 to the Registrar for a license under sub-section (1) of section 8.

(2) The memorandum of association of the proposed company shall be in Form No. INC.13.

(3) The application under sub-rule (1) shall be accompanied by the following documents, namely: —

(a)the draft memorandum and articles of association of the proposed company;
(b)the declaration in Form No. INC.14 by an Advocate, a Chartered Accountant, Cost Accountant or Company Secretary in practice, that the draft memorandum and articles of association have been drawn up in conformity with the provisions of section 8 and rules made thereunder and that all the requirements of the Act and the rules made thereunder relating to registration of the company under section 8 and matters incidental or supplemental thereto have been complied with;
(c)an estimate of the future annual income and expenditure of the company for next three years, specifying the sources of the income and the objects of the expenditure;
(d)the declaration by each of the persons making the application in Form No. INC.15.

License for existing companies.

20. (1) A limited company registered under this Act or under any previous company law, with any of the objectsspecified in clause (a) of sub-section (1) of section 8 and the restrictions and prohibitions as mentioned respectively in clauses (b) and (c) of that sub-section, and which is desirous of being registered under section 8, without the addition to its name of the word “Limited” or as the case may be, the words “Private Limited”, shall make an application in Form No. INC.12 along with the fee as provided in the Companies (Registration Offices and fees) Rules, 2014 to the Registrar for a licence under sub-section (5) of section 8.

(2) The application under sub-rule (1), shall be accompanied by the following documents, namely:—

(a)the memorandum and articles of association of the company;
(b)the declaration as given in Form No. INC.14 by an Advocate, a Chartered Accountant, Cost Accountant or Company Secretary in Practice, that the memorandum and articles of association have been drawn up in conformity with the provisions of section 8 and rules made thereunder and that all the requirements of the Act and the rules made thereunder relating to registration of the company under section 8 and matters incidental or supplemental thereto have been complied with;
(c)for each of the two financial years immediately preceding the date of the application, or when the company has functioned only for one financial year, for such year (i) the financial statements, (ii) the Board’s reports, and (iii) the audit reports, relating to existing companies;
(d)a statement showing in detail the assets (with the values thereof), and the liabilities of the company, as on the date of the application or within thirty days preceding that date;
(e)an estimate of the future annual income and expenditure of the company for next three years, specifying the sources of the income and the objects of the expenditure;
(f)the certified copy of the resolutions passed in general/board meetings approving registration of the company under section 8; and
(g)a declaration by each of the persons making the application in Form No. INC.15.

(3) The company shall, within a week from the date of making the application to the Registrar, publish a notice at his own expense, and a copy of the notice, as published, shall be sent forthwith to the Registrar and the said notice shall be in Form No. INC.26 and shall be published—

(a)at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the proposed company is to be situated or is situated, and circulating in that district, and at least once in English language in an English newspaper circulating in that district; and
(b)on the websites as may be notified by the Central Government.

(4) The Registrar may require the applicant to furnish the approval or concurrence of any appropriate authority, regulatory body, department or Ministry of the Central Government or the State Government(s).

(5) The Registrar shall, after considering the objections, if any, received by it within thirty days from the date of publication of notice, and after consulting any authority, regulatory body, Department or Ministry of the Central Government or the State Government(s), as it may, in its discretion, decide whether the license should or should not be granted.

(6) The licence shall be in Form No. INC.16 or Form No. INC.17, as the case may be, and the Registrar shall have power to include in the licence such other conditions as may be deemed necessary by him.

(7) The Registrar may direct the company to insert in its memorandum, or in its articles, or partly in one and partly in the other, such conditions of the license as may be specified by the Registrar in this behalf.

Conditions for conversion of a company registered under section 8 into a company of any other kind.

21. (1) A company registered under section 8 which intends to convert itself into a company of any other kind shall pass a special resolution at a general meeting for approving such conversion.

(2) The explanatory statement annexed to the notice convening the general meeting shall set out in detail the reasons for opting for such conversion including the following, namely:—

(a)the date of incorporation of the company;
(b)the principal objects of the company as set out in the memorandum of association;
(c)the reasons as to why the activities for achieving the objects of the company cannot be carried on in the current structure i.e. as a section 8 company;
(d)if the principal or main objects of the company are proposed to be altered, what would be the alteredobjects and the reasons for the alteration;
(e)what are the privileges or concessions currently enjoyed by the company, such as tax exemptions, approvals for receiving donations or contributions including foreign contributions, land and other immovable properties, if any, that were acquired by the company at concessional rates or prices or gratuitously and, if so, the market prices prevalent at the time of acquisition and the price that was paid by the company, details of any donations or bequests received by the company with conditions attached to their utilization etc.
(f)details of impact of the proposed conversion on the members of the company including details of any benefits that may accrue to the members as a result of the conversion.

(3) A certified true copy of the special resolution along with a copy of the Notice convening the meeting including the explanatory statement shall be filed with the Registrar in Form No. MGT.14 along with the fee.

(4) The company shall file an application in Form No. INC.18 with the Regional Director with the fee along with a certified true copy of the special resolution and a copy of the Notice convening the meeting including the explanatory statement for approval for converting itself into a company of any other kind and the company shall also attach the proof of serving of the notice served to all the authorities mentioned in sub-rule (2) of rule 22.

(5) A copy of the application with annexures as filed with the Regional Director shall also be filed with the Registrar.

Other conditions to be complied with by companies registered under section 8 seeking conversion into any other kind.

22. (1) The company shall, within a week from the date of submitting the application to the Regional Director, publish a notice at its own expense, and a copy of the notice, as published, shall be sent forthwith to the Regional Director and the said notice shall be in Form No. INC.19 and shall be published—

(a)at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated, and having a wide circulation in that district, and at least once in English language in an English newspaper having a wide circulation in that district; and
(b)on the website of the company, if any, and as may be notified or directed by the Central Government.

(2) The company shall send a copy of the notice, simultaneously with its publication, together with a copy of the application and all attachments by registered post or hand delivery, to the Chief Commissioner of Income Tax having jurisdiction over the company, Income Tax Officer who has jurisdiction over the company, the Charity Commissioner, the Chief Secretary of the State in which the registered office of the company is situated, any organisation or Department of the Central Government or State Government or other authority under whose jurisdiction the company has been operating and if any of these authorities wish to make any representation to Regional Director, it shall do so within sixty days of the receipt of the notice, after giving an opportunity to the Company.

(3) The copy of proof of serving such notice shall be attached to the application.

(4) The Board of directors shall give a declaration to the effect that no portion of the income or property of the company has been or shall be paid or transferred directly or indirectly by way of dividend or bonus or otherwise to persons who are or have been members of the company or to any one or more of them or to any persons claiming through any one or more of them.

(5) Where the company has obtained any special status, privilege, exemption, benefit or grant(s) from any authority such as Income Tax Department, Charity Commissioner or any organisation or Department of Central Government, State Government, Municipal Body or any recognized authority, a “No Objection Certificate” must be obtained, if required under the terms of the said special status, privilege, exemption, benefit or grant(s) from the concerned authority and filed with the Regional Director, along with the application.

(6) The company should have filed all its financial statements and Annual Returns upto the financial year preceding the submission of the application to the Regional Director and all other returns required to be filed under the Act up to the date of submitting the application to the Regional Director and in the event the application is made after the expiry of three months from the date of preceding financial year to which the financial statement has been filed, a statement of the financial position duly certified by chartered accountant made up to a date not preceding thirty days of filing the application shall be attached.

(7) The company shall attach with the application a certificate from practicing Chartered Accountant or Company Secretary in practice or Cost Accountant in practice certifying that the conditions laid down in the Act and these rules relating to conversion of a company registered under section 8 into any other kind of company, have been complied with.

(8) The Regional Director may require the applicant to furnish the approval or concurrence of any particular authority for grant of his approval for the conversion and he may also obtain the report from the Registrar.

(9) On receipt of the application, and on being satisfied , the Regional Director shall issue an order approving the conversion of the company into a company of any other kind subject to such terms and conditions as may be imposed in the facts and circumstances of each case including the following conditions, namely:—

(a)the company shall give up and shall not claim, with effect from the date its conversion takes effect, any special status, exemptions or privileges that it enjoyed by virtue of having been registered under the provisions of section 8;
(b)if the company had acquired any immovable property free of cost or at a concessional cost from any government or authority, it may be required to pay the difference between the cost at which it acquired such property and the market price of such property at the time of conversion either to the government or to the authority that provided the immovable property;
(c)any accumulated profit or unutilised income of the company brought forward from previous years shall be first utilized to settle all outstanding statutory dues, amounts due to lenders claims of creditors, suppliers, service providers and others including employees and lastly any loans advanced by the promoters or members or any other amounts due to them and the balance, if any, shall be transferred to the Investor Education and Protection Fund within thirty days of receiving the approval for conversion;

(10) Before imposing the conditions or rejecting the application, the company shall be given a reasonable opportunity of being heard by the Regional Director.

(11) On receipt of the approval of the Regional Director,

(i)the company shall convene a general meeting of its members to pass a special resolution for amendingits memorandum of association and articles of association as required under the Act consequent to the conversion of the section 8 company into a company of any other kind;
(ii)the Company shall thereafter file with the Registrar.—
(a)a certified copy of the approval of the Regional Director within thirty days from the date of receipt of the order in Form No. INC.20 along with the fee;
(b)amended memorandum of association and articles of association of the company.
(c)a declaration by the directors that the conditions, if any imposed by the Regional Director have been fully complied with.

(12) On receipt of the documents referred to in sub-rule (10) above, the Registrar shall register the documents and issue the fresh Certificate of Incorporation.

Intimation to Registrar of revocation of licence issued under section 8.

23. Where the licence granted to a company registered under section 8 has been revoked, the company shall apply to the Registrar in Form No. INC.20 along with the fee to convert its status and change of name accordingly.

Declaration at the time of commencement of business.

24. The declaration filed by a director shall be in Form No. INC.21 along with the fee as and the contents of the form shall be verified by a Company Secretary in practice or a Chartered Accountant or a Cost Accountant in practice:

Provided that in the case of a company requiring registration from sectoral regulators such as Reserve Bank of India, Securities and Exchange Board of India etc. the approval from such regulator shall be required.

Verification of registered office.

25. (1) The verification of the registered office shall be filed in Form No. INC.22 along with the fee, and

(2) There shall be attached to said Form, any of the following documents, namely :—

(a)the registered document of the title of the premises of the registered office in the name of the company; or
(b)the notarized copy of lease or rent agreement in the name of the company along with a copy of rent paid receipt not older than one month;
(c)the authorization from the owner or authorized occupant of the premises along with proof of ownership or occupancy authorization, to use the premises by the company as its registered office; and
(d)the proof of evidence of any utility service like telephone, gas, electricity, etc. depicting the address of the premises in the name of the owner or document, as the case may be, which is not older than two months.

Publication of name by company.

26. The Central Government may as and when required, notify the other documents on which the name of the company shall be printed.

Notice and verification of change of situation of the registered office.

27. The notice of change of the situation of the registered office and verification thereof shall be filed in Form No. INC.22 along with the fee and shall be attached to the said form, the similar documents and manner of verification as are specified for verification of Registered office on incorporation in terms of sub-section (2) of section 12.

Shifting of registered office within the same State.

28. (1) An application seeking confirmation from the Regional Director for shifting the registered office within the same State from the jurisdiction of one Registrar of Companies to the jurisdiction of another Registrar of Companies, shall be filed by the company with the Regional Director in Form No. INC.23 along with the fee.

(2) The company shall, not less than one month before filing any application with the Regional Director for the change of registered office.—

(a)publish a notice, at least once in a daily newspaper published in English and in the principal language of that district in which the registered office of the company is situated and circulating in that district; and
(b)serve individual notice on each debenture holder, depositor and creditor of the company, clearly indicating the matter of application and stating that any person whose interest is likely to be affected by the proposed alteration of the memorandum may intimate his nature of interest and grounds of opposition to the Regional Director with a copy to the company within twenty one days of the date of publication of that notice :
Provided that in case no objection is received by the Regional Director within twenty one days from the date of service or publication of the notice, the person concerned shall be deemed to have given his consent to the change of registered office proposed in the application :
Provided further that the shifting of registered office shall not be allowed if any inquiry, inspection or investigation has been initiated against the company or any prosecution is pending against the company under the Act.

Alteration of Memorandum by change of name.

29. (1) The change of name shall not be allowed to a company which has defaulted in filing its annual returns or financial statements or any document due for filing with the Registrar or which has defaulted in repayment of matured deposits or debentures or interest on deposits or debentures.

(2) An application shall be filed in Form No. INC.24 along with the fee for change in the name of the company and a new certificate of incorporation in Form No. INC.25 shall be issued to the company consequent upon change of name.

Shifting of registered office from one State or Union territory to another State.

30. (1) An application under sub-section (4) of section 13, for the purpose of seeking approval for alteration ofmemorandum with regard to the change of place of the registered office from one State Government or Union territory to another, shall be filed with the Central Government in Form No. INC.23 along with the fee and shall be accompanied by the following documents, namely:—

(a)a copy of the memorandum and articles of association;
(b)a copy of the notice convening the general meeting along with relevant Explanatory Statement;
(c)a copy of the special resolution sanctioning the alteration by the members of the company;
(d)a copy of the minutes of the general meeting at which the resolution authorizing such alteration was passed, giving details of the number of votes cast in favour or against the resolution;
(e)an affidavit verifying the application;
(f)the list of creditors and debenture holders entitled to object to the application;
(g)an affidavit verifying the list of creditors;
(h)the document relating to payment of application fee;
(i)a copy of board resolution or Power of Attorney or the executed Vakalatnama, as the case may be.

(2) There shall be attached to the application, a list of creditors and debenture holders, drawn up to the latest practicable date preceding the date of filing of application by not more than one month, setting forth the following details, namely:—

(a)the names and address of every creditor and debenture-holder of the company;
(b)the nature and respective amounts due to them in respect of debts, claims or liabilities:
Provided that the applicant company shall file an affidavit, signed by the Company Secretary of the company, if any and not less than two directors of the company, one of whom shall be a managing director, where there is one, to the effect that they have made a full enquiry into the affairs of the company and, having done so, have formed an opinion that the list of creditors is correct, and that the estimated value as given in the list of the debts or claims payable on a contingency or not ascertained are proper estimates of the values of such debts and claims and that there are no other debts or claims against the company to their knowledge.

(3) There shall also be attached to the application an affidavit from the directors of the company that no employee shall be retrenched as a consequence of shifting of the registered office from one state to another state and also there shall be an application filed by the company to the Chief Secretary of the concerned State Government or the Union territory.

(4) A duly authenticated copy of the list of creditors shall be kept at the registered office of the company and any person desirous of inspecting the same may, at any time during the ordinary hours of business, inspect and take extracts from the same on payment of a sum not exceeding ten rupees per page to the company.

(5) There shall also be attached to the application a copy of the acknowledgement of service of a copy of the application with complete annexures to the Registrar and Chief Secretary of the State Government or Union territory where the registered office is situated at the time of filing the application.

(6) The company shall at least fourteen days before the date of hearing—

(a)advertise the application in Form No. INC.26 in a vernacular newspaper in the principal vernacular language in the district in which the registered office of the company is situated, and at least once in English language in an English newspaper circulating in that district;
(b)serve, by registered post with acknowledgement due, individual notice(s), to the effect set out in clause(a) on each debenture-holder and creditor of the company; and
(c)serve, by registered post with acknowledgement due, a notice together with the copy of the application to the Registrar and to the Securities and Exchange Board of India, in the case of listed companies and to the regulatory body, if the company is regulated under any special Act or law for the time being in force.

(7) Where any objection of any person whose interest is likely to be affected by the proposed application has been received by the applicant, it shall serve a copy thereof to the Central Government on or before the date of hearing.

(8) Where no objection has been received from any of the parties, who have been duly served, the application may be put up for orders without hearing.

(9) Before confirming the alteration, the Central Government shall ensure that, with respect to every creditor and debenture-holder who, in the opinion of the Central Government, is entitled to object to the alteration, and who signifies his objection in the manner directed by the Central Government, either his consent to the alteration has been obtained or his debt or claim has been discharged or has determined, or has been secured to the satisfaction of the Central Government.

The Central Government may make an order confirming the alteration on such terms and conditions, if any, as it thinks fit, and may make such order as to costs as it thinks proper :

Provided that the shifting of registered office shall not be allowed if any inquiry, inspection or investigation has been initiated against the company or any prosecution is pending against the company under the Act.

31. The certified copy of the order of the Central Government, approving the alteration of the memorandum for transfer of registered office of the company from one State to another, shall be filed in Form No. INC.28 along with the fee as with the Registrar of the State within thirty days from the date of receipt of certified copy of the order.

Change of objects for which money is raised through prospectus.

32. (1) Where the company has raised money from public through prospectus and has any unutilised amount out of the money so raised, it shall not change the objects for which the money so raised is to be applied unless a special resolution is passed through postal ballot and the notice in respect of the resolution for altering theobjects shall contain the following particulars, namely:—

(a)the total money received;
(b)the total money utilized for the objects stated in the prospectus;
(c)the unutilized amount out of the money so raised through prospectus;
(d)the particulars of the proposed alteration or change in the objects;
(e)the justification for the alteration or change in the objects;
(f)the amount proposed to be utilised for the new objects;
(g)the estimated financial impact of the proposed alteration on the earnings and cash flow of the company;
(h)the other relevant information which is necessary for the members to take an informed decision on the proposed resolution;
(i)the place from where any interested person may obtain a copy of the notice of resolution to be passed.

(2) The advertisement giving details of each resolution to be passed for change in objects which shall be published simultaneously with the dispatch of postal ballot notices to shareholders.

(3) The notice shall also be placed on the website of the company, if any.

Alteration of articles.

33. (1) For effecting the conversion of a private company into a public company or vice versa, the application shall be filed in Form No. INC.27 with fee.

(2) A copy of order of the competent authority approving the alteration, shall be filed with the Registrar in Form No. INC.27 with fee together with the printed copy of the altered articles within fifteen days of the receipt of the order from the Central Government.

Explanation.—For the purposes of this sub-rule, the term “competent authority” means, the Central Government.

Copies of memorandum and articles, etc. to be given to members on request being made by them.

34. A company shall on payment of fee, send a copy of each of the following documents to a member within seven days of the request being made by him—

(1)the memorandum;
(2)the articles;
(3)every agreement and every resolution referred to in sub-section (1) of section 117, if and so far as they have not been embodied in the memorandum and articles.

Service of documents.

35. (1) A document may be served on a company or an officer thereof through electronic transmission.

(2) For the purposes of sub-rule (1), the term, “electronic transmission” means a communication—

(a)delivered by—
(i)facsimile telecommunication or electronic mail when directed to the facsimile number or electronic mail address, respectively, which the company or the officer has provided from time to time for sending communications to the company or the officer respectively;
(ii)posting of an electronic message board or network that the company or the officer has designated for such communications, and which transmission shall be validly delivered upon the posting; or
(iii)other means of electronic communication,
in respect of which the company or the officer has put in place reasonable systems to verify that the sender is the person purporting to send the transmission; and
(b)that creates a record that is capable of retention, retrieval and review, and which may thereafter be rendered into clearly legible tangible form.

(3) A document may be served on the Registrar or any member through electronic transmission.

(4) For the purposes of sub-rule (3), the term, “electronic transmission” means a communication—

(a)delivered by—
(i)facsimile telecommunication or electronic mail when directed to the facsimile number or electronic mail address, respectively, which the Registrar or the member has provided from time to time for sending communications to the Registrar or the member respectively;
(ii)posting of an electronic message board or network that the Registrar or the member has designated for those communications, and which transmission shall be validly delivered upon the posting; or
(iii)other means of electronic communication,
in respect of which the Registrar or the member has put in place reasonable systems to verify that the sender is the person purporting to send the transmission, and
(b)that creates a record that is capable of retention, retrieval and review, and which may thereafter be rendered into clearly legible tangible form.

(5) For the purposes of sub-sections (1) and (2) of section 20, “courier” means a document sent through a courier which provides proof of delivery.

(6) In case of delivery by post, such service shall be deemed to have been effected— (i) in the case of a notice of a meeting, at the expiration of forty eight hours after the letter containing the same is posted; and (ii) in any other case, at the time at which the letter would be delivered in the ordinary course of post.

CHAPTER III : PROSPECTUS AND ALLOTMENT OF SECURITIES

COMPANIES (PROSPECTUS AND ALLOTMENT OF SECURITIES) RULES, 2014

In exercise of the powers conferred under section 26, sub-section (1) of section 27, section 28, section 29, sub-section (2) of section 31, sub-sections (3) and (4) of section 39, sub-section (6) of section 40 and section 42 read with section 469 of the Companies Act, 2013 and in supersession of the Companies (Central Government’s) General Rules and Forms, 1956 or any other rules prescribed under the Companies Act, 1956 (1 of 1956) on matters covered under these rules except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called the Companies (Prospectus and Allotment of Securities) Rules, 2014.

(2) They shall come into force on the date of their publication in the Official Gazette.

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Annexure” means the Annexure to these rules;
(c)“fees” means fees as specified in the Companies (Registration Offices and Fees) Rules, 2014;
(d)“Form” or “e-Form” means a form set forth in Annexure to these rules which shall be used for the matter to which it relates;
(e)“Regional Director” means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional Director;
(f)“section” means section of the Act;

(2) Words and expressions used in these rules but not defined and defined in the Act or in the Companies (Specification of definitions details) Rules, 2014, shall have the meanings respectively assigned to them in the Act or in the said Rules.

Information to be stated in the prospectus.

3. (1) The Prospectus to be issued shall contain—

(a)the names, addresses and contact details of the corporate office of the issuer company, compliance officer of the issuer company, merchant bankers and co-managers to the issue, registrar to the issue, bankers to the issue, stock brokers to the issue, credit rating agency for the issue, arrangers, if any, of the instrument, names and addresses of such other persons as may be specified by the Securities and Exchange Board in its regulations;
(b)the dates relating to opening and closing of the issue;
(c)a declaration which shall be made by the Board or the Committee authorised by the Board in the prospectus that the allotment letters shall be issued or application money shall be refunded within fifteen days from the closure of the issue or such lesser time as may be specified by Securities and Exchange Board or else the application money shall be refunded to the applicants forthwith, failing which interest shall be due to be paid to the applicants at the rate of fifteen per cent per annum for the delayed period.
(d)a statement given by the Board that all monies received out of the issue shall be transferred to a separate bank account maintained with a Scheduled Bank;
(e)the details of all utilized and unutilised monies out of the monies collected in the previous issue made by way of public offer shall be disclosed and continued to be disclosed in the balance sheet till the time any part of the proceeds of such previous issue remains unutilized indicating the purpose for which such monies have been utilized, and the securities or other forms of financial assets in which such unutilized monies have been invested;
(f)the names, addresses, telephone numbers, fax numbers and e-mail addresses of the underwriters and the amount underwritten by them;
(g)the consent of trustees, solicitors or advocates, merchant bankers to the issue, registrar to the issue, lenders and experts;

(2) The capital structure of the company shall be presented in the following manner, namely:—

(i) (a) the authorised, issued, subscribed and paid up capital (number of securities, description and aggregate nominal value);

(b) the size of the present issue;

(c) the paid up capital—

(A)after the issue;
(B)after conversion of convertible instruments (if applicable);

(d) the share premium account (before and after the issue);

(ii) the details of the existing share capital of the issuer company in a tabular form, indicating therein with regard to each allotment, the date of allotment, the number of shares allotted, the face value of the shares allotted, the price and the form of consideration:

Provided that in the case of an initial public offer of an existing company, the details regarding individual allotment shall be given from the date of incorporation of the issuer and in the case of a listed issuer company, the details shall be given for five years immediately preceding the date of filing of the prospectus:

Provided that the issuer company shall also disclose the number and price at which each of the allotments were made in the last two years preceding the date of the prospectus separately indicating the allotments made for considerations other than cash and the details of the consideration in each case.

(3) The prospectus to be issued shall contain the following particulars, namely:—

(a)the objects of the issue;
(b)the purpose for which there is a requirement of funds;
(c)the funding plan (means of finance);
(d)the summary of the project appraisal report (if any);
(e)the schedule of implementation of the project;
(f)the interim use of funds, if any

(4) The prospectus to be issued shall contain the following details and disclosures, namely:—

(i)the details of any litigation or legal action pending or taken by any Ministry or Department of the Government or a statutory authority against any promoter of the issuer company during the last five years immediately preceding the year of the issue of the prospectus and any direction issued by such Ministry or Department or statutory authority upon conclusion of such litigation or legal action shall be disclosed;
(ii)the details of pending litigation involving the issuer, promoter, director, subsidiaries, group companies or any other person, whose outcome could have material adverse effect on the position of the issuer;
(iii)the details of pending proceedings initiated against the issuer company for economic offences;
(iv)the details of default and non-payment of statutory dues etc.

(5) The details of directors including their appointment and remuneration, and particulars of the nature and extent of their interests in the company shall be disclosed in the following manner, namely:—

(i)the name, designation, Director Identification Number (DIN), age, address, period of directorship, details of other directorships;
(ii)the remuneration payable or paid to the director by the issuer company, its subsidiary and associate company; shareholding of the director in the company including any stock options; shareholding in subsidiaries and associate companies; appointment of any relatives to an office or place of profit;
(iii)the full particulars of the nature and extent of interest, if any, of every director:
(a)in the promotion of the issuer company; or
(b)in any immovable property acquired by the issuer company in the two years preceding the date of the Prospectus or any immovable property proposed to be acquired by it.
(iv)where the interest of such a director consists in being a member of a firm or company, the nature and extent of his interest in the firm or company, with a statement of all sums paid or agreed to be paid to him or to the firm or company in cash or shares or otherwise by any person either to induce him to become, or to help him qualify as a director, or otherwise for services rendered by him or by the firm or company, in connection with the promotion or formation of the issuer company shall be disclosed.

(6) The sources of promoters’ contribution, if any, shall be disclosed in the following manner, namely:—

(i)the total shareholding of the promoters, clearly stating the name of the promoter, nature of issue, date of allotment, number of shares, face value, issue price or consideration, source of funds contributed, date when the shares were made fully paid up, percentage of the total pre and post issue capital;
(ii)the proceeds out of the sale of shares of the company and shares of its subsidiary companies previously held by each of the promoters;
(iii)the disclosure for sources of promoters contribution shall also include the particulars of name, address and the amount so raised as loan, financial assistance etc., if any, by promoters for making such contributions and in case of own sources, complete details thereof.

Reports to be set out in the Prospectus.

4. The following reports shall be set out with the prospectus, namely:—

(1) The reports by the auditors with respect to profits and losses and assets and liabilities.

Explanation.—For the purposes of this sub-rule, the report shall also include the amounts or rates of dividends, if any, paid by the issuer company in respect of each class of shares for each of the five financial years immediately preceding the year of issue of the prospectus, giving particulars of each class of shares on which such dividends have been paid and particulars of the cases in which no dividends have been paid in respect of any class of shares for any of those years:

Provided that if no accounts have been made up in respect of any part of the period of five years ending on a date three months before the issue of the prospectus, a statement of that fact accompanied by a statement of the accounts of the issuer company in respect of that part of the said period up to a date not earlier than six months of the date of issue of the prospectus indicating the profit or loss for that period and assets and liabilities position as at the end of that period together with a certificate from the auditors that such accounts have been examined and found correct and the said statement may indicate the nature of provision or adjustments made or which are yet to be made.

(2) The reports relating to profits and losses for each of the five financial years or where five financial years have not expired, for each of the financial year immediately preceding the issue of the prospectus shall—

(a)if the company has no subsidiaries, deal with the profits or losses of the company (distinguishing items of a non-recurring nature) for each of the five financial years immediately preceding the year of the issue of the prospectus; and
(b)if the company has subsidiaries, deal separately with issuer company’s profits or losses as provided inclause (a) and in addition, deal either—
(i)as a whole with the combined profits or losses of its subsidiaries, so far as they concern members of the issuer company; or
(ii)individually with the profits or losses of each subsidiary, so far as they concern members of the issuer company; or
(iii)as a whole with the profits or losses of the company, and, so far as they concern members of the issuer company, with the combined profits or losses of its subsidiaries.

(3) The reports made by the auditors in respect of the business of the company shall be stated in the prospectus in the manner provided in sub-rule (2).

Other matters and reports to be stated in the prospectus.

5. The prospectus shall include the following other matters and reports, namely:—

(1) If the proceeds, or any part of the proceeds, of the issue of the shares or debentures are or is to be applied directly or indirectly—

(a)in the purchase of any business; or
(b)in the purchase of an interest in any business and by reason of that purchase, or anything to be done in consequence thereof, or in connection therewith; the company shall become entitled to an interest in either the capital or profits and losses or both, in such business exceeding fifty per cent thereof,
a report made by a chartered accountant (who shall be named in the prospectus) upon—
(i)the profits or losses of the business for each of the five financial years immediately preceding the date of the issue of the prospectus; and
(ii)the assets and liabilities of the business as on the last date to which the accounts of the business were made up, being a date not more than one hundred and twenty days before the date of the issue of the prospectus;
(c)in purchase or acquisition of any immovable property including indirect acquisition of immovable property for which advances have been paid to even third parties, disclosures regarding—
(i)the names, addresses, descriptions and occupations of the vendors;
(ii)the amount paid or payable in cash, to the vendor and, where there is more than one vendor, or the company is a sub-purchaser, the amount so paid or payable to each vendor, specifying separately the amount, if any, paid or payable for goodwill;
(iii)the nature of the title or interest in such property proposed to be acquired by the company; and
(iv)the particulars of every transaction relating to the property, completed within the two preceding years, in which any vendor of the property or any person who is, or was at the time of the transaction, a promoter, or a director or proposed director of the company had any interest, direct or indirect, specifying the date of the transaction and the name of such promoter, director or proposed director and stating the amount payable by or to such vendor, promoter, director or proposed director in respect of the transaction.

(2)(a) If—

(i)the proceeds, or any part of the proceeds, of the issue of the shares or debentures are or are to be applied directly or indirectly and in any manner resulting in the acquisition by the company of shares in any other body corporate; and
(ii)by reason of that acquisition or anything to be done in consequence thereof or in connection therewith, that body corporate shall become a subsidiary of the company, a report shall be made by a Chartered Accountant (who shall be named in the prospectus) upon—
(A)the profits or losses of the other body corporate for each of the five financial years immediately preceding the issue of the prospectus; and
(B)the assets and liabilities of the other body corporate as on the last date to which its accounts were made up.

(b) The said report shall—

(i)indicate how the profits or losses of the other body corporate dealt with by the report would, in respect of the shares to be acquired, have concerned members of the issuer company and what allowance would have been required to be made, in relation to assets and liabilities so dealt with for the holders of the balance shares, if the issuer company had at all material times held the shares proposed to be acquired; and
(ii)where the other body corporate has subsidiaries, deal with the profits or losses and the assets and liabilities of the body corporate and its subsidiaries in the manner as provided in sub-clause (ii) ofclause (a).

(3) The matters relating to terms and conditions of the term loans including re-scheduling, prepayment, penalty, default.

(4) The aggregate number of securities of the issuer company and its subsidiary companies purchased or sold by the promoter group and by the directors of the company which is a promoter of the issuer company and by the directors of the issuer company and their relatives within six months immediately preceding the date of filing the prospectus with the Registrar of Companies shall be disclosed.

(5) The matters relating to—

(A)Material contracts;
(B)Other material contracts;
(C)Time and place at which the contracts together with documents will be available for inspection from the date of prospectus until the date of closing of subscription list.

(6) The related party transactions entered during the last five financial years immediately preceding the issue of prospectus as under—

(a)all transactions with related parties with respect to giving of loans or, guarantees, providing securities in connection with loans made, or investments made;
(b)all other transactions which are material to the issuer company or the related party, or any transactions that are unusual in their nature or conditions, involving goods, services, or tangible or intangible assets, to which the issuer company or any of its parent companies was a party:

Provided that the disclosures for related party transactions for the period prior to notification of these rules shall be to the extent of disclosure requirements as per the Companies Act, 1956 and the relevant accounting standards prevailing at the said time.

(7) The summary of reservations or qualifications or adverse remarks of auditors in the last five financial years immediately preceding the year of issue of prospectus and of their impact on the financial statements and financial position of the company and the corrective steps taken and proposed to be taken by the company for each of the said reservations or qualifications or adverse remarks.

(8) The details of any inquiry, inspections or investigations initiated or conducted under the Companies Act or any previous companies law in the last five years immediately preceding the year of issue of prospectus in the case of company and all of its subsidiaries; and if there were any prosecutions filed (whether pending or not); fines imposed or compounding of offences done in the last five years immediately preceding the year of the prospectus for the company and all of its subsidiaries.

(9) The details of acts of material frauds committed against the company in the last five years, if any, and if so, the action taken by the company.

(10) A fact sheet shall be included at the beginning of the prospectus which shall contain—

(a)the type of offer document (“Red Herring Prospectus” or “Shelf Prospectus” or “Prospectus”).
(b)the name of the issuer company, date and place of its incorporation, its logo, address of its registered office, its telephone number, fax number, details of contact person, website address, e-mail address;
(c)the names of the promoters of the issuer company;
(d)the nature, number, price and amount of securities offered and issue size, as may be applicable;
(e)the aggregate amount proposed to be raised through all the stages of offers of specified securities made through the shelf prospectus;
(f)the name, logo and address of the registrar to the issue, along with its telephone number, fax number, website address and e-mail address;
(g)the issue schedule—
(i)date of opening of the issue;
(ii)date of closing of the issue;
(iii)date of earliest closing of the issue, if any.
(h)the credit rating, if applicable;
(i)all the grades obtained for the initial public offer;
(j)the name(s) of the recognised stock exchanges where the securities are proposed to be listed;
(k)the details about eligible investors;
(l)coupon rate, coupon payment frequency, redemption date, redemption amount and details of debenture trustee in case of debt securities.

Period for which information to be provided in certain cases.

6. For the matters specified in rules 3 to 5, which require a company to provide certain particulars or information relating to the preceding five financial years, it shall be sufficient compliance for a company which has not completed five years, if such company provides such particulars or information for all the previous years since its incorporation.

Variation in terms of contracts referred to in the prospectus or objects for which prospectus was issued.

7. (1) where the company has raised money from public through prospectus and has any unutilized amount out of the money so raised, it shall not vary the terms of contracts referred to in the prospectus or objects for which the prospectus was issued except by passing a special resolution through postal ballot and the notice of the proposed special resolution shall contain the following particulars, namely:—

(a)the original purpose or object of the Issue;
(b)the total money raised;
(c)the money utilised for the objects of the company stated in the prospectus;
(d)the extent of achievement of proposed objects (that is fifty per cent; sixty per cent, etc);
(e)the unutilised amount out of the money so raised through prospectus;
(f)the particulars of the proposed variation in the terms of contracts referred to in the prospectus or objectsfor which prospectus was issued;
(g)the reason and justification for seeking variation;
(h)the proposed time limit within which the proposed varied objects would be achieved;
(i)the clause-wise details as specified in sub-rule (3) of rule 3 as was required with respect to the originally proposed objects of the issue;
(j)the risk factors pertaining to the new objects; and
(k)the other relevant information which is necessary for the members to take an informed decision on the proposed resolution.

(2) The advertisement of the notice for getting the resolution passed for varying the terms of any contract referred to in the prospectus or altering the objects for which the prospectus was issued, shall be in Form PAS-1and such advertisement shall be published simultaneously with dispatch of Postal Ballot Notices to Shareholders.

(3) The notice shall also be placed on the web-site of the company, if any.

Offer of Sale by Members.

8. (1) The provisions of Part I of Chapter III namely “Prospectus and Allotment of Securities” and rules made thereunder shall be applicable to an offer of sale referred to in section 28 except for the following, namely:—

(a)the provisions relating to minimum subscription;
(b)the provisions for minimum application value;
(c)the provisions requiring any statement to be made by the Board of directors in respect of the utilization of money; and
(d)any other provision or information which cannot be compiled or gathered by the offeror, with detailed justifications for not being able to comply with such provisions.

(2) The prospectus issued under section 28 shall disclose the name of the person or persons or entity bearing the cost of making the offer of sale along with reasons.

Dematerialisation of securities.

9. The promoters of every public company making a public offer of any convertible securities may hold such securities only in dematerialised form:

Provided that the entire holding of convertible securities of the company by the promoters held in physical form up to the date of the initial public offer shall be converted into dematerialised form before such offer is made and thereafter such promoter shareholding shall be held in dematerialized form only.

Shelf prospectus and Information Memorandum.

10. The information memorandum shall be prepared in Form PAS-2 and filed with the Registrar along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 within one month prior to the issue of a second or subsequent offer of securities under the shelf prospectus.

Refund of Application Money.

11. (1) If the stated minimum amount has not been subscribed and the sum payable on application is not received within the period specified therein, then the application money shall be repaid within a period of fifteen days from the closure of the issue and if any such money is not so repaid within such period, the directors of the company who are officers in default shall jointly and severally be liable to repay that money with interest at the rate of fifteen per cent per annum.

(2) The application money to be refunded shall be credited only to the bank account from which the subscription was remitted.

Return of Allotment.

12. (1) Whenever a company having a share capital makes any allotment of its securities, the company shall, within thirty days thereafter, file with the Registrar a return of allotment in Form PAS-3, along with the fee as specified in the Companies (Registration Offices and Fees) Rules, 2014.

(2) There shall be attached to the Form PAS-3 a list of allottees stating their names, address, occupation, if any, and number of securities allotted to each of the allottees and the list shall be certified by the signatory of theForm PAS-3 as being complete and correct as per the records of the company.

(3) In the case of securities (not being bonus shares) allotted as fully or partly paid up for consideration other than cash, there shall be attached to the Form PAS-3 a copy of the contract, duly stamped, pursuant to which the securities have been allotted together with any contract of sale if relating to a property or an asset, or a contract for services or other consideration.

(4) Where a contract referred to in sub-rule (3) is not reduced to writing, the company shall furnish along with the Form PAS-3 complete particulars of the contract stamped with the same stamp duty as would have been payable if the contract had been reduced to writing and those particulars shall be deemed to be an instrument within the meaning of the Indian Stamp Act, 1899 (2 of 1899), and the Registrar may, as a condition of filing the particulars, require that the stamp duty payable thereon be adjudicated under section 31 of the Indian Stamp Act, 1899.

(5) A report of a registered valuer in respect of valuation of the consideration shall also be attached along with the contract as mentioned in sub-rule (3) and sub-rule (4).

(6) In the case of issue of bonus shares, a copy of the resolution passed in the general meeting authorizing the issue of such shares shall be attached to the Form PAS-3.

(7) In case the shares have been issued in pursuance of clause (c) of sub-section (1) of section 62 by a company other than a listed company whose equity shares or convertible preference shares are listed on any recognised stock exchange, there shall be attached to Form PAS-3, the valuation report of the registered valuer.

Explanation.—Pending notification of sub-section (1) of section 247 of the Act and finalisation of qualifications and experience of valuers, valuation of stocks, shares, debentures, securities etc. shall be conducted by an independent merchant banker who is registered with the Securities and Exchange Board of India or an independent chartered accountant in practice having a minimum experience of ten years.

Payment of commission.

13. A company may pay commission to any person in connection with the subscription or procurement of subscription to its securities, whether absolute or conditional, subject to the following conditions, namely:—

(a)the payment of such commission shall be authorized in the company’s articles of association;
(b)the commission may be paid out of proceeds of the issue or the profit of the company or both;
(c)the rate of commission paid or agreed to be paid shall not exceed, in case of shares, five per cent of the price at which the shares are issued or a rate authorised by the articles, whichever is less, and in case of debentures, shall not exceed two and a half per cent of the price at which the debentures are issued, or as specified in the company’s articles, whichever is less;
(d)the prospectus of the company shall disclose—
(i)the name of the underwriters;
(ii)the rate and amount of the commission payable to the underwriter; and
(iii)the number of securities which is to be underwritten or subscribed by the underwriter absolutely or conditionally.
(e)there shall not be paid commission to any underwriter on securities which are not offered to the public for subscription;
(f)a copy of the contract for the payment of commission is delivered to the Registrar at the time of delivery of the prospectus for registration.

Private Placement.

14. (1)(a) For the purposes of sub-section (1) of section 42, a company may make an offer or invitation to subscribe to securities through issue of a private placement offer letter in Form PAS-4.

(b) A private placement offer letter shall be accompanied by an application form serially numbered and addressed specifically to the person to whom the offer is made and shall be sent to him, either in writing or in electronic mode, within thirty days of recording the names of such persons in accordance with sub-section (7) of section 42:

Provided that no person other than the person so addressed in the application form shall be allowed to apply through such application form and any application not conforming to this condition shall be treated as invalid.

(2) A company shall not make a private placement of its securities unless—

(a)the proposed offer of securities or invitation to subscribe securities has been previously approved by the shareholders of the company, by a Special Resolution, for each of the Offers or Invitations:
Provided that in the explanatory statement annexed to the notice for the general meeting the basis or justification for the price (including premium, if any) at which the offer or invitation is being made shall be disclosed:
Provided further that in case of offer or invitation for non-convertible debentures, it shall be sufficient if the company passes a previous special resolution only once in a year for all the offers or invitation for such debentures during the year.
(b)such offer or invitation shall be made to not more than two hundred persons in the aggregate in a financial year:
Provided that any offer or invitation made to qualified institutional buyers, or to employees of the company under a scheme of employees stock option as per provisions of clause (b) of sub-section (1) of section 62 shall not be considered while calculating the limit of two hundred persons;
Explanation.—For the purposes of this sub-rule, it is hereby clarified that—
(i)the restrictions under sub-clause (b) would be reckoned individually for each kind of security that is equity share, preference share or debenture;
(ii)the requirement of provisions of sub-section (3) of section 42 shall apply in respect of offer or invitation of each kind of security and no offer or invitation of another kind of security shall be made unless allotments with respect to offer or invitation made earlier in respect of any other kind of security is completed;
(c)the value of such offer or invitation per person shall be with an investment size of not less than twenty thousand rupees of face value of the securities;
(d)the payment to be made for subscription to securities shall be made from the bank account of the person subscribing to such securities and the company shall keep the record of the Bank account from where such payments for subscriptions have been received:
Provided that monies payable on subscription to securities to be held by joint holders shall be paid from the bank account of the person whose name appears first in the application.

(3) The company shall maintain a complete record of private placement offers in Form PAS-5:

Provided that a copy of such record along with the private placement offer letter in Form PAS-4 shall be filed with the Registrar with fee as provided in Companies (Registration Offices and Fees) Rules, 2014 and where the company is listed, with the Securities and Exchange Board within a period of thirty days of circulation of the private placement offer letter.

Explanation.—For the purpose of this rule, it is hereby clarified that the date of private placement offer letter shall be deemed to be the date of circulation of private placement offer letter.

(4) A return of allotment of securities under section 42 shall be filed with the Registrar within thirty days of allotment in Form PAS-3 and with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 along with a complete list of all security holders containing—

(i)the full name, address, Permanent Account Number and E-mail ID of such security holder;
(ii)the class of security held;
(iii)the date of allotment of security;
(iv)the number of securities held, nominal value and amount paid on such securities; and particulars of consideration received if the securities were issued for consideration other than cash.

(5) The provisions of clauses (b) and (c) of sub-rule (2) shall not be applicable to—

(a)non-banking financial companies which are registered with the Reserve Bank of India under Reserve Bank of India Act, 1934; and
(b)housing finance companies which are registered with the National Housing Bank under National Housing Bank Act, 1987,
if they are complying with regulations made by Reserve Bank of India or National Housing Bank in respect of offer or invitation to be issued on private placement basis:
Provided that such companies shall comply with sub-clauses (b) and (c) of sub-rule (2) in case the Reserve Bank of India or the National Housing Bank have not specified similar regulations.

COMPANIES (ISSUE OF GLOBAL DEPOSITORY RECEIPTS) RULES, 2014

In exercise of the powers conferred by section 41 read with section 469 of the Companies Act, 2013, the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These Rules may be called Companies (Issue of Global Depository Receipts) Rules, 2014.

(2) They shall come into force on the date of publication of this notification in the Official Gazette.

Definitions.

2. (1) In these Rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Section” means section of the Act;
(c)“Scheme” means the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 or any modification or reenactment thereof;

(2) Words and expressions occurring in these rules shall bear the same meaning as in the Act and the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 or any modification or re-enactment thereof.

Eligibility to issue depository receipts.

3. A company may issue depository receipts provided it is eligible to do so in terms of the Scheme and relevant provisions of the Foreign Exchange Management Rules and Regulations.

Conditions for issue of depository receipts

4. (1) The Board of Directors of the company intending to issue depository receipts shall pass a resolution authorising the company to do so.

(2) The company shall take prior approval of its shareholders by a special resolution to be passed at a general meeting:

Provided that a special resolution passed under section 62 for issue of shares underlying the depository receipts, shall be deemed to be a special resolution for the purpose of section 41 as well.

(3) The depository receipts shall be issued by an overseas depository bank appointed by the company and the underlying shares shall be kept in the custody of a domestic custodian bank.

(4) The company shall ensure that all the applicable provisions of the Scheme and the rules or regulations or guidelines issued by the Reserve Bank of India are complied with before and after the issue of depository receipts.

(5) The company shall appoint a merchant banker or a practising chartered accountant or a practising cost accountant or a practising company secretary to oversee all the compliances relating to issue of depository receipts and the compliance report taken from such merchant banker or practising chartered accountant or practising cost accountant or practising company secretary, as the case may be, shall be placed at the meeting of the Board of Directors of the company or of the committee of the Board of directors authorised by the Board in this regard to be held immediately after closure of all formalities of the issue of depository receipts:

Provided that the committee of the Board of directors referred to above shall have at least one independent director in case the company is required to have independent directors.

Manner and form of depository receipts.

5. (1) The depository receipts can be issued by way of public offering or private placement or in any other manner prevalent abroad and may be listed or traded in an overseas listing or trading platform.

(2) The depository receipts may be issued against issue of new shares or may be sponsored against shares held by shareholders of the company in accordance with such conditions as the Central Government or Reserve Bank of India may prescribe or specify from time to time.

(3) The underlying shares shall be allotted in the name of the overseas depository bank and against such shares, the depository receipts shall be issued by the overseas depository bank abroad.

Voting rights.

6. (1) A holder of depository receipts may become a member of the company and shall be entitled to vote as such only on conversion of the depository receipts into underlying shares after following the procedure provided in the Scheme and the provisions of this Act.

(2) Until the conversion of depository receipts, the overseas depository shall be entitled to vote on behalf of the holders of depository receipts in accordance with the provisions of the agreement entered into between the depository, holders of depository receipts and the company in this regard.

Proceeds of issue.

7. The proceeds of issues of depository receipts shall either be remitted to a bank account in India or deposited in an Indian bank operating abroad or any foreign bank (which is a Scheduled Bank under the Reserve Bank of India Act, 1934) having operations in India with an agreement that the foreign bank having operations in India shall take responsibility for furnishing all the information which may be required and in the event of a sponsored issue of Depository Receipts, the proceeds of the sale shall be credited to the respective bank account of the shareholders.

Depository receipts prior to commencement.

8. (1) A company which has issued depository receipts prior to commencement of these rules shall comply with the requirements under this rule within six months of such commencement.

(2) Any issue of depository receipts after six months of commencement of these rules shall be in accordance with the requirements of these rules.

Non applicability of certain provisions of the Act.

9. (1) The provisions of the Act and any rules issued thereunder insofar as they relate to public issue of shares or debentures shall not apply to issue of depository receipts abroad.

(2) The offer document, by whatever name called and if prepared for the issue of depository receipts, shall not be treated as a prospectus or an offer document within the meaning of this Act and all the provisions as applicable to a prospectus or an offer document shall not apply to a depository receipts offer document.

(3) Notwithstanding anything contained under section 88 of the Act, until the redemption of depository receipts, the name of the overseas depository bank shall be entered in the Register of Members of the company.

CHAPTER IV : SHARE CAPITAL AND DEBENTURES

COMPANIES (SHARE CAPITAL AND DEBENTURES) RULES, 2014

In exercise of the powers conferred under clause (a)(ii) of section 43, sub-clause (d) of sub-section (1) of section 54, sub-section (2) of section 55, sub-section (1) of section 56, sub-section (3) of section 56, sub-section (1) of section 62, sub-section (2) of section 42, clause (f) of sub-section (2) of section 63, sub-section (1) of section 64,clause (b) of sub-section (3) of section 67, sub-section (2) of section 68, sub-section (6) of section 68, sub-section (9) of section 68, sub-section (10) of section 68, sub-section (3) of section 71, sub-section (6) of section 71, sub-section (13) of section 71 and sub-sections (1) and (2) of section 72, read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013) and in supersession of the Companies (Central Government’s) General Rules and Forms, 1956 or any other relevant rules prescribed under the Companies Act, 1956 (1 of 1956) on matters covered under these rules, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1)These rules may be called the Companies (Share Capital and Debentures) Rules, 2014.

(2) They shall come into force on the date of their publication in the Official Gazette.

Definitions

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Annexure” means the Annexure to these rules;
(c)“Fees” means the fees as specified in the Companies (Registration Offices and Fees) Rules, 2014;
(d)“Form” or “e-form” means a form set forth in Annexure to these rules which shall be used for the matter to which it relates;
(e)“Regional Director” means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional Director;
(f)“section” means the section of the Act.

(2) Words and expressions used in these rules but not defined and defined in the Act or in Companies (Specification of Definitions Details) Rules, 2014 shall have the meanings respectively assigned to them in the Act and said rules.

Application

3. The provisions of these rules shall apply to—

(a)all unlisted public companies;
(b)all private companies; and
(c)listed companies,

so far as they do not contradict or conflict with any other provision framed in this regard by the Securities and Exchange Board of India.

Equity shares with differential rights

4. (1) No company limited by shares shall issue equity shares with differential rights as to dividend, voting or otherwise, unless it complies with the following conditions, namely:—

(a)the articles of association of the company authorizes the issue of shares with differential rights;
(b)the issue of shares is authorized by an ordinary resolution passed at a general meeting of the shareholders:
Provided that where the equity shares of a company are listed on a recognized stock exchange, the issue of such shares shall be approved by the shareholders through postal ballot;
(c)the shares with differential rights shall not exceed twenty-six per cent of the total post-issue paid up equity share capital including equity shares with differential rights issued at any point of time;
(d)the company having consistent track record of distributable profits for the last three years;
(e)the company has not defaulted in filing financial statements and annual returns for three financial years immediately preceding the financial year in which it is decided to issue such shares;
(f)the company has no subsisting default in the payment of a declared dividend to its shareholders or repayment of its matured deposits or redemption of its preference shares or debentures that have become due for redemption or payment of interest on such deposits or debentures or payment of dividend;
(g)the company has not defaulted in payment of the dividend on preference shares or repayment of any term loan from a public financial institution or State level financial institution or scheduled Bank that has become repayable or interest payable thereon or dues with respect to statutory payments relating to its employees to any authority or default in crediting the amount in Investor Education and Protection Fund to the Central Government;
(h)the company has not been penalized by Court or Tribunal during the last three years of any offence under the Reserve Bank of India Act, 1934, the Securities and Exchange Board of India Act, 1992, the Securities Contracts Regulation Act, 1956, the Foreign Exchange Management Act, 1999 or any other special Act, under which such companies being regulated by sectoral regulators.

(2) The explanatory statement to be annexed to the notice of the general meeting in pursuance of section 102 or of a postal ballot in pursuance of section 110 shall contain the following particulars, namely:—

(a)the total number of shares to be issued with differential rights;
(b)the details of the differential rights;
(c)the percentage of the shares with differential rights to the total post issue paid up equity share capital including equity shares with differential rights issued at any point of time;
(d)the reasons or justification for the issue;
(e)the price at which such shares are proposed to be issued either at par or at premium;
(f)the basis on which the price has been arrived at;
(g)(i) in case of private placement or preferential issue—
(a)details of total number of shares proposed to be allotted to promoters, directors and key managerial personnel;
(b)details of total number of shares proposed to be allotted to persons other than promoters, directors and key managerial personnel and their relationship if any with any promoter, director or key managerial personnel;
(ii) in case of public issue – reservation, if any, for different classes of applicants including promoters, directors or key managerial personnel;
(h)the percentage of voting right which the equity share capital with differential voting right shall carry to the total voting right of the aggregate equity share capital;
(i)the scale or proportion in which the voting rights of such class or type of shares shall vary;
(j)the change in control, if any, in the company that may occur consequent to the issue of equity shares with differential voting rights;
(k)the diluted Earning Per Share pursuant to the issue of such shares, calculated in accordance with the applicable accounting standards;
(l)the pre and post issue shareholding pattern along with voting rights as per clause 35 of the listing agreement issued by Security Exchange Board of India from time to time.

(3) The company shall not convert its existing equity share capital with voting rights into equity share capital carrying differential voting rights and vice versa.

(4) The Board of Directors shall, inter alia, disclose in the Board’s Report for the financial year in which the issue of equity shares with differential rights was completed, the following details, namely:—

(a)the total number of shares allotted with differential rights;
(b)the details of the differential rights relating to voting rights and dividends;
(c)the percentage of the shares with differential rights to the total post issue equity share capital with differential rights issued at any point of time and percentage of voting rights which the equity share capital with differential voting right shall carry to the total voting right of the aggregate equity share capital;
(d)the price at which such shares have been issued;
(e)the particulars of promoters, directors or key managerial personnel to whom such shares are issued;
(f)the change in control, if any, in the company consequent to the issue of equity shares with differential voting rights;
(g)the diluted Earning Per Share pursuant to the issue of each class of shares, calculated in accordance with the applicable accounting standards;
(h)the pre and post issue shareholding pattern along with voting rights in the format specified under sub-rule (2) of rule 4.

(5) The holders of the equity shares with differential rights shall enjoy all other rights such as bonus shares, rights shares etc., which the holders of equity shares are entitled to, subject to the differential rights with which such shares have been issued.

(6) Where a company issues equity shares with differential rights, the Register of Members maintained under section 88 shall contain all the relevant particulars of the shares so issued along with details of the shareholders.

Explanation.—For the purposes of this rule, it is hereby clarified that differential rights attached to such shares issued by any company under the provisions of Companies Act, 1956, shall continue till such rights are converted with the differential rights in accordance with the provisions of the Companies Act, 2013.

Certificate of shares (where shares are not in demat form)

5. (1) Where a company issues any share capital, no certificate of any share or shares held in the company shall be issued, except—

(a)in pursuance of a resolution passed by the Board; and
(b)on surrender to the company of the letter of allotment or fractional coupons of requisite value, save in cases of issues against letters of acceptance or of renunciation, or in cases of issue of bonus shares:
Provided that if the letter of allotment is lost or destroyed, the Board may impose such reasonable terms, if any, as to seek supporting evidence and indemnity and the payment of out-of-pocket expenses incurred by the company in investigating evidence, as it may think fit.

(2) Every certificate of share or shares shall be in Form No. SH.1 or as near thereto as possible and shall specify the name(s) of the person(s) in whose favour the certificate is issued, the shares to which it relates and the amount paid-up thereon.

(3) Every share certificate shall be issued under the seal of the company, which shall be affixed in the presence of, and signed by—

(a)two directors duly authorized by the Board of Directors of the company for the purpose or the committee of the Board, if so authorized by the Board; and
(b)the secretary or any person authorised by the Board for the purpose:
Provided that, in companies wherein a Company Secretary is appointed under the provisions of the Act, he shall deemed to be authorised for the purpose of this rule:
Provided further that, if the composition of the Board permits of it, at least one of the aforesaid two directors shall be a person other than the managing or whole-time director:
Provided also that, in case of a One Person Company, every share certificate shall be issued under the seal of the company, which shall be affixed in the presence of and signed by one director or a person authorized by the Board of Directors of the company for the purpose and the Company Secretary, or any other person authorized by the Board for the purpose.

Explanation.— For the purposes of this sub-rule, a director shall be deemed to have signed the share certificate if his signature is printed thereon as a facsimile signature by means of any machine, equipment or other mechanical means such as engraving in metal or lithography, or digitally signed, but not by means of a rubber stamp, provided that the director shall be personally responsible for permitting the affixation of his signature thus and the safe custody of any machine, equipment or other material used for the purpose.

(4) The particulars of every share certificate issued in accordance with sub-rule (1) shall be entered in the Register of Members maintained in accordance with the provisions of section 88 along with the name(s) of person(s) to whom it has been issued, indicating the date of issue.

Issue of renewed or duplicate share certificate.

6. (1)(a) The certificate of any share or shares shall not be issued either in exchange for those which are sub-divided or consolidated or in replacement of those which are defaced, mutilated, torn or old, decrepit, worn out, or where the pages on the reverse for recording transfers have been duly utilised, unless the certificate in lieu of which it is issued is surrendered to the company:

Provided that the company may charge such fee as the Board thinks fit, not exceeding fifty rupees per certificate issued on splitting or consolidation of share certificate(s) or in replacement of share certificate(s) that are defaced, mutilated, torn or old, decrepit or worn out:

(b) Where a certificate is issued in any of the circumstances specified in this sub-rule, it shall be stated on the face of it and be recorded in the Register maintained for the purpose, that it is “Issued in lieu of share certificate No. …………………….. sub-divided/replaced/on consolidation” and also that no fee shall be payable pursuant to scheme of arrangement sanctioned by the High Court or Central Government:

(c) A company may replace all the existing certificates by new certificates upon sub-division or consolidation of shares or merger or demerger or any reconstitution without requiring old certificates to be surrendered subject to compliance with clause (a) of sub-rule (1) of rule 5, sub-rule (2) of rule 5 and sub-rule (3) of rule 5.

(2)(a) The duplicate share certificate shall be not issued in lieu of those that are lost or destroyed, without the prior consent of the Board and without payment of such fees as the Board thinks fit, not exceeding rupees fifty per certificate and on such reasonable terms, such as furnishing supporting evidence and indemnity and the payment of out-of-pocket expenses incurred by the company in investigating the evidence produced:

(b) Where a certificate is issued in any of the circumstances specified in this sub-rule, it shall be stated prominently on the face of it and be recorded in the Register maintained for the purpose, that it is “duplicate issued in lieu of share certificate No. ……………………………” and the word “duplicate” shall be stamped or printed prominently on the face of the share certificate:

(c) In case unlisted companies, the duplicate share certificates shall be issued within a period of three months and in case of listed companies such certificate shall be issued within fifteen days, from the date of submission of complete documents with the company respectively.

(3)(a) The particulars of every share certificate issued in accordance with sub-rules (1) and (2) shall be entered forthwith in a Register of Renewed and Duplicate Share Certificates maintained in Form No.SH.2 indicating against the name(s) of the person(s) to whom the certificate is issued, the number and date of issue of the share certificate in lieu of which the new certificate is issued, and the necessary changes indicated in the Register of Members by suitable cross-references in the “Remarks” column.

(b) The register shall be kept at the registered office of the company or at such other place where the Register of Members is kept and it shall be preserved permanently and shall be kept in the custody of the company secretary of the company or any other person authorized by the Board for the purpose.

(c) All entries made in the Register of Renewed and Duplicate Share Certificates shall be authenticated by the company secretary or such other person as may be authorised by the Board for the purposes of sealing and signing the share certificate under the provisions of sub-rule (3) of rule 5.

Maintenance of share certificate forms and related books and documents.

7. (1) All blank forms to be used for issue of share certificates shall be printed and the printing shall be done only on the authority of a resolution of the Board and the blank form shall be consecutively machine-numbered and the forms and the blocks, engravings, facsimiles and hues relating to the printing of such forms shall be kept in the custody of the secretary or such other person as the Board may authorise for the purpose; and the company secretary or other person aforesaid shall be responsible for rendering an account of these forms to the Board.

(2) The following persons shall be responsible for the maintenance, preservation and safe custody of all books and documents relating to the issue of share certificates, including the blank forms of share certificates referred to in sub-rule (1), namely: —

(a)the committee of the Board, if so authorized by the Board or where the company has a company secretary, the company secretary; or
(b)where the company has no company secretary, a Director specifically authorised by the Board for such purpose.

(3) All books referred to in sub-rule (2) shall be preserved in good order not less than thirty years and in case of disputed cases, shall be preserved permanently, and all certificates surrendered to a company shall immediately be defaced by stamping or printing the word “cancelled” in bold letters and may be destroyed after the expiry of three years from the date on which they are surrendered, under the authority of a resolution of the Board and in the presence of a person duly appointed by the Board in this behalf:

Provided that nothing in this sub-rule shall apply to cancellation of the certificates of securities, under sub-section (2) of section 6 of the Depositories Act, 1996 (22 of 1996), when such certificates are cancelled in accordance with sub-regulation (5) of regulation 54 of the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996, made under section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) read with section 25 of the Depositories Act, 1996 (22 of 1996).

Issue of sweat equity shares.

8. (1) A company other than a listed company, which is not required to comply with the Securities and Exchange Board of India Regulations on sweat equity, shall not issue sweat equity shares to its directors or employees at a discount or for consideration other than cash, for their providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called, unless the issue is authorised by a special resolution passed by the company in general meeting.

Explanation.— For the purposes of this rule—

(i)the expressions “Employee” means—
(a)a permanent employee of the company who has been working in India or outside India, for at least last one year; or
(b)a director of the company, whether a whole time director or not; or
(c)an employee or a director as defined in sub-clause (a) or (b) above of a subsidiary, in India or outside India, or of a holding company of the company;
(ii)the expression ‘Value additions’ means actual or anticipated economic benefits derived or to be derived by the company from an expert or a professional for providing know-how or making available rights in the nature of intellectual property rights, by such person to whom sweat equity is being issued for which the consideration is not paid or included in the normal remuneration payable under the contract of employment, in the case of an employee.

(2) The explanatory statement to be annexed to the notice of the general meeting pursuant to section 102 shall contain the following particulars, namely:—

(a)the date of the Board meeting at which the proposal for issue of sweat equity shares was approved;
(b)the reasons or justification for the issue;
(c)the class of shares under which sweat equity shares are intended to be issued;
(d)the total number of shares to be issued as sweat equity;
(e)the class or classes of directors or employees to whom such equity shares are to be issued;
(f)the principal terms and conditions on which sweat equity shares are to be issued, including basis of valuation;
(g)the time period of association of such person with the company;
(h)the names of the directors or employees to whom the sweat equity shares will be issued and their relationship with the promoter or/and Key Managerial Personnel;
(i)the price at which the sweat equity shares are proposed to be issued;
(j)the consideration including consideration other than cash, if any to be received for the sweat equity;
(k)the ceiling on managerial remuneration, if any, be breached by issuance of such sweat equity and how it is proposed to be dealt with;
(l)a statement to the effect that the company shall conform to the applicable accounting standards; and
(m)diluted earning per share pursuant to the issue of sweat equity shares, calculated in accordance with the applicable accounting standards.

(3) The special resolution authorising the issue of sweat equity shares shall be valid for making the allotment within a period of not more than twelve months from the date of passing of the special resolution.

(4) The company shall not issue sweat equity shares for more than fifteen per cent of the existing paid up equity share capital in a year or shares of the issue value of rupees five crores, whichever is higher:

Provided that the issuance of sweat equity shares in the Company shall not exceed twenty five per cent, of the paid up equity capital of the Company at any time.

(5) The sweat equity shares issued to directors or employees shall be locked in/non-transferable for a period of three years from the date of allotment and the fact that the share certificates are under lock-in and the period of expiry of lock in shall be stamped in bold or mentioned in any other prominent manner on the share certificate.

(6) The sweat equity shares to be issued shall be valued at a price determined by a registered valuer as the fair price giving justification for such valuation.

(7) The valuation of intellectual property rights or of know how or value additions for which sweat equity shares are to be issued, shall be carried out by a registered valuer, who shall provide a proper report addressed to the Board of directors with justification for such valuation.

(8) A copy of gist along with critical elements of the valuation report obtained under clause (6) and clause (7) shall be sent to the shareholders with the notice of the general meeting.

(9) Where sweat equity shares are issued for a non-cash consideration on the basis of a valuation report in respect thereof obtained from the registered valuer, such non-cash consideration shall be treated in the following manner in the books of account of the company—

(a)where the non-cash consideration takes the form of a depreciable or amortizable asset, it shall be carried to the balance sheet of the company in accordance with the accounting standards; or
(b)where clause (a) is not applicable, it shall be expensed as provided in the accounting standards.

(10) The amount of sweat equity shares issued shall be treated as part of managerial remuneration for the purposes of sections 197 and 198 of the Act, if the following conditions are fulfilled, namely:—

(a)the sweat equity shares are issued to any director or manager; and
(b)they are issued for consideration other than cash, which does not take the form of an asset which can be carried to the balance sheet of the company in accordance with the applicable accounting standards.

(11) In respect of sweat equity shares issued during an accounting period, the accounting value of sweat equity shares shall be treated as a form of compensation to the employee or the director in the financial statements of the company, if the sweat equity shares are not issued pursuant to acquisition of an asset.

(12) If the shares are issued pursuant to acquisition of an asset, the value of the asset, as determined by the valuation report, shall be carried in the balance sheet as per the Accounting Standards and such amount of the accounting value of the sweat equity shares that is in excess of the value of the asset acquired, as per the valuation report, shall be treated as a form of compensation to the employee or the director in the financial statements of the company.

Explanation.—For the purposes of this sub-rule, it is hereby clarified that the Accounting value shall be the fair value of the sweat equity shares as determined by a registered valuer under sub-rule (6).

(13) The Board of Directors shall, inter alia, disclose in the Directors’ Report for the year in which such shares are issued, the following details of issue of sweat equity shares namely:—

(a)the class of director or employee to whom sweat equity shares were issued;
(b)the class of shares issued as Sweat Equity Shares;
(c)the number of sweat equity shares issued to the directors, key managerial personnel or other employees showing separately the number of such shares issued to them, if any, for consideration other than cash and the individual names of allottees holding one per cent or more of the issued share capital;
(d)the reasons or justification for the issue;
(e)the principal terms and conditions for issue of sweat equity shares, including pricing formula;
(f)the total number of shares arising as a result of issue of sweat equity shares;
(g)the percentage of the sweat equity shares of the total post issued and paid up share capital;
(h)the consideration (including consideration other than cash) received or benefit accrued to the company from the issue of sweat equity shares;
(i)the diluted Earnings Per Share (EPS) pursuant to issuance of sweat equity shares.

(14)(a) The company shall maintain a Register of Sweat Equity Shares in Form No. SH.3 and shall forthwith enter therein the particulars of Sweat Equity Shares issued under section 54.

(b) The Register of Sweat Equity Shares shall be maintained at the registered office of the company or such other place as the Board may decide.

(c) The entries in the register shall be authenticated by the Company Secretary of the company or by any other person authorized by the Board for the purpose.

9. Issue and redemption of preference shares.

(1) A company having a share capital may, if so authorised by its articles, issue preference shares subject to the following conditions, namely:—

(a)the issue of such shares has been authorized by passing a special resolution in the general meeting of the company.
(b)the company, at the time of such issue of preference shares, has no subsisting default in the redemption of preference shares issued either before or after the commencement of this Act or in payment of dividend due on any preference shares.

(2) A company issuing preference shares shall set out in the resolution, particulars in respect of the following matters relating to such shares, namely:—

(a)the priority with respect to payment of dividend or repayment of capital vis-a-vis equity shares;
(b)the participation in surplus fund;
(c)the participation in surplus assets and profits, on winding-up which may remain after the entire capital has been repaid;
(d)the payment of dividend on cumulative or non-cumulative basis;
(e)the conversion of preference shares into equity shares;
(f)the voting rights;
(g)the redemption of preference shares.

(3) The explanatory statement to be annexed to the notice of the general meeting pursuant to section 102 shall,inter alia, provide the complete material facts concerned with and relevant to the issue of such shares, including—

(a)the size of the issue and number of preference shares to be issued and nominal value of each share;
(b)the nature of such shares i.e. cumulative or non-cumulative, participating or non-participating, convertible or non-convertible;
(c)the objectives of the issue;
(d)the manner of issue of shares;
(e)the price at which such shares are proposed to be issued;
(f)the basis on which the price has been arrived at;
(g)the terms of issue, including terms and rate of dividend on each share, etc.;
(h)the terms of redemption, including the tenure of redemption, redemption of shares at premium and if the preference shares are convertible, the terms of conversion;
(i)the manner and modes of redemption;
(j)the current shareholding pattern of the company;
(k)the expected dilution in equity share capital upon conversion of preference shares.

(4) Where a company issues preference shares, the Register of Members maintained under section 88 shall contain the particulars in respect of such preference shareholder(s).

(5) A company intending to list its preference shares on a recognized stock exchange shall issue such shares in accordance with the regulations made by the Securities and Exchange Board of India in this behalf.

(6) A company may redeem its preference shares only on the terms on which they were issued or as varied after due approval of preference shareholders under section 48 of the Act and the preference shares may be redeemed:—

(a)at a fixed time or on the happening of a particular event;
(b)any time at the company’s option; or
(c)any time at the shareholder’s option.

10. Issue and redemption of preference shares by company in infrastructural projects.

A company engaged in the setting up and dealing with of infrastructural projects may issue preference shares for a period exceeding twenty years but not exceeding thirty years, subject to the redemption of a minimum ten per cent of such preference shares per year from the twenty first year onwards or earlier, on proportionate basis, at the option of the preference shareholders.

11. Instrument of transfer.

(1) An instrument of transfer of securities held in physical form shall be in Form No.SH.4 and every instrument of transfer with the date of its execution specified thereon shall be delivered to the company within sixty days from the date of such execution.

(2) In the case of a company not having share capital, provisions of sub-rule (1) shall apply as if the references therein to securities were references instead to the interest of the member in the company.

(3) A company shall not register a transfer of partly paid shares, unless the company has given a notice in Form No. SH.5 to the transferee and the transferee has given no objection to the transfer within two weeks from the date of receipt of notice.

12. Issue of employee stock options.

A company, other than a listed company, which is not required to comply with Securities and Exchange Board of India Employee Stock Option Scheme Guidelines shall not offer shares to its employees under a scheme of employees’ stock option (hereinafter referred to as “Employees Stock Option Scheme”), unless it complies with the following requirements, namely:—

(1) the issue of Employees Stock Option Scheme has been approved by the shareholders of the company by passing a special resolution.

Explanation: For the purposes of clause (b) of sub-section (1) of section 62 and this rule “Employee” means—

(a)a permanent employee of the company who has been working in India or outside India; or
(b)a director of the company, whether a whole time director or not but excluding an independent director; or
(c)an employee as defined in clause (a) or (b) of a subsidiary, in India or outside India, or of a holding company of the company or of an associate company but does not include—
(i)an employee who is a promoter or a person belonging to the promoter group; or
(ii)a director who either himself or through his relative or through any body corporate, directly or indirectly, holds more than ten per cent of the outstanding equity shares of the company.

(2) The company shall make the following disclosures in the explanatory statement annexed to the notice for passing of the resolution—

(a)the total number of stock options to be granted;
(b)identification of classes of employees entitled to participate in the Employees Stock Option Scheme;
(c)the appraisal process for determining the eligibility of employees to the Employees Stock Option Scheme;
(d)the requirements of vesting and period of vesting;
(e)the maximum period within which the options shall be vested;
(f)the exercise price or the formula for arriving at the same;
(g)the exercise period and process of exercise;
(h)the Lock-in period, if any;
(i)the maximum number of options to be granted per employee and in aggregate;
(j)the method which the company shall use to value its options;
(k)the conditions under which option vested in employees may lapse e.g. in case of termination of employment for misconduct;
(l)the specified time period within which the employee shall exercise the vested options in the event of a proposed termination of employment or resignation of employee; and
(m)a statement to the effect that the company shall comply with the applicable accounting standards .

(3) The companies granting option to its employees pursuant to Employees Stock Option Scheme will have the freedom to determine the exercise price in conformity with the applicable accounting policies, if any.

(4) The approval of shareholders by way of separate resolution shall be obtained by the company in case of—

(a)grant of option to employees of subsidiary or holding company; or
(b)grant of option to identified employees, during any one year, equal to or exceeding one per cent of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant of option.

(5)(a) The company may by special resolution, vary the terms of Employees Stock Option Scheme not yet exercised by the employees provided such variation is not prejudicial to the interests of the option holders.

(b) The notice for passing special resolution for variation of terms of Employees Stock Option Scheme shall disclose full of the variation, the rationale therefor, and the details of the employees who are beneficiaries of such variation.

(6)(a) There shall be a minimum period of one year between the grant of options and vesting of option:

Provided that in a case where options are granted by a company under its Employees Stock Option Scheme in lieu of options held by the same person under an Employees Stock Option Scheme in another company, which has merged or amalgamated with the first mentioned company, the period during which the options granted by the merging or amalgamating company were held by him shall be adjusted against the minimum vesting period required under this clause;

(b) The company shall have the freedom to specify the lock-in period for the shares issued pursuant to exercise of option.

(c) The Employees shall not have right to receive any dividend or to vote or in any manner enjoy the benefits of a shareholder in respect of option granted to them, till shares are issued on exercise of option.

(7) The amount, if any, payable by the employees, at the time of grant of option—

(a)may be forfeited by the company if the option is not exercised by the employees within the exercise period; or
(b)the amount may be refunded to the employees if the options are not vested due to non-fulfilment of conditions relating to vesting of option as per the Employees Stock Option Scheme.

(8)(a) The option granted to employees shall not be transferable to any other person.

(b) The option granted to the employees shall not be pledged, hypothecated, mortgaged or otherwise encumbered or alienated in any other manner.

(c) Subject to clause (d), no person other than the employees to whom the option is granted shall be entitled to exercise the option.

(d) In the event of the death of employee while in employment, all the options granted to him till such date shall vest in the legal heirs or nominees of the deceased employee.

(e) In case the employee suffers a permanent incapacity while in employment, all the options granted to him as on the date of permanent incapacitation, shall vest in him on that day.

(f) In the event of resignation or termination of employment, all options not vested in the employee as on that day shall expire. However, the employee can exercise the options granted to him which are vested within the period specified in this behalf, subject to the terms and conditions under the scheme granting such options as approved by the Board.

(9) The Board of directors, shall, inter alia, disclose in the Directors’ Report for the year, the following details of the Employees Stock Option Scheme:

(a)options granted;
(b)options vested;
(c)options exercised;
(d)the total number of shares arising as a result of exercise of option;
(e)options lapsed;
(f)the exercise price;
(g)variation of terms of options;
(h)money realized by exercise of options;
(i)total number of options in force;
(j)employee wise details of options granted to:—
(i)key managerial personnel.
(ii)any other employee who receives a grant of options in any one year of option amounting to five per cent or more of options granted during that year.
(iii)identified employees who were granted option, during any one year, equal to or exceeding one per cent of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant.

(10) (a) The company shall maintain a Register of Employee Stock Options in Form No. SH.6 and shall forthwith enter therein the particulars of option granted under clause (b) of sub-section (1) of section 62.

(b) The Register of Employee Stock Options shall be maintained at the registered office of the company or such other place as the Board may decide.

(c) The entries in the register shall be authenticated by the company secretary of the company or by any other person authorized by the Board for the purpose.

(11) Where the equity shares of the company are listed on a recognized stock exchange, the Employees Stock Option Scheme shall be issued, in accordance with the regulations made by the Securities and Exchange Board of India in this behalf.

Issue of shares on preferential basis

13. (1) For the purposes of clause (c) of sub-section (1) of section 62, if authorized by a special resolution passed in a general meeting, shares may be issued by any company in any manner whatsoever including by way of a preferential offer, to any persons whether or not those persons include the persons referred to in clause (a) orclause (b) of sub-section (1) of section 62 and such issue on preferential basis should also comply with conditions laid down in section 42 of the Act:

Provided that the price of shares to be issued on a preferential basis by a listed company shall not be required to be determined by the valuation report of a registered valuer.

Explanation.—For the purposes of this rule, (i) the expression ‘Preferential Offer’ means an issue of shares or other securities, by a company to any select person or group of persons on a preferential basis and does not include shares or other securities offered through a public issue, rights issue, employee stock option scheme, employee stock purchase scheme or an issue of sweat equity shares or bonus shares or depository receipts issued in a country outside India or foreign securities;

(ii) the expression, “shares or other securities” means equity shares, fully convertible debentures, partly convertible debentures or any other securities, which would be convertible into or exchanged with equity shares at a later date.

(2) Where the preferential offer of shares or other securities is made by a company whose share or other securities are listed on a recognized stock exchange, such preferential offer shall be made in accordance with the provisions of the Act and regulations made by the Securities and Exchange Board, and if they are not listed, the preferential offer shall be made in accordance with the provisions of the Act and rules made hereunder and subject to compliance with the following requirements, namely:—

(a)the issue is authorized by its articles of association;
(b)the issue has been authorized by a special resolution of the members;
(c)the securities allotted by way of preferential offer shall be made fully paid up at the time of their allotment.
(d)The company shall make the following disclosures in the explanatory statement to be annexed to the notice of the general meeting pursuant to section 102 of the Act:
(i)the objects of the issue;
(ii)the total number of shares or other securities to be issued;
(iii)the price or price band at/within which the allotment is proposed;
(iv)basis on which the price has been arrived at along with report of the registered valuer;
(v)relevant date with reference to which the price has been arrived at;
(vi)the class or classes of persons to whom the allotment is proposed to be made;
(vii)intention of promoters, directors or key managerial personnel to subscribe to the offer;
(viii)the proposed time within which the allotment shall be completed;
(ix)the names of the proposed allottees and the percentage of post preferential offer capital that may be held by them;
(x)the change in control, if any, in the company that would occur consequent to the preferential offer;
(xi)the number of persons to whom allotment on preferential basis have already been made during the year, in terms of number of securities as well as price;
(xii)the justification for the allotment proposed to be made for consideration other than cash together with valuation report of the registered valuer.
(xiii)The pre issue and post issue shareholding pattern of the company in the following format—
Sr. No.CategoryPre IssuePost Issue
No. of Shares held% of share- holdingNo. of shares held% of share- holding
APromoters’ holding :
1Indian :
Individual
Bodies Corporate
Sub-Total
2Foreign Promoters
Sub-Total (A)
BNon-Promoters’ holding :
1.Institutional Investors
2.Non-Institution :
Private Corporate Bodies
Directors and Relatives
Indian Public
Others (Including NRIs)
Sub-Total (B)
GRAND TOTAL
(e)the allotment of securities on a preferential basis made pursuant to the special resolution passed pursuant to sub-rule (2)(b) shall be completed within a period of twelve months from the date of passing of the special resolution.
(f)if the allotment of securities is not completed within twelve months from the date of passing of the special resolution, another special resolution shall be passed for the company to complete such allotment thereafter.
(g)the price of the shares or other securities to be issued on a preferential basis, either for cash or for consideration other than cash, shall be determined on the basis of valuation report of a registered valuer;
(h)where convertible securities are offered on a preferential basis with an option to apply for and get equity shares allotted, the price of the resultant shares shall be determined beforehand on the basis of a valuation report of a registered valuer and also complied with the provisions of section 62 of the Act;
(i)where shares or other securities are to be allotted for consideration other than cash, the valuation of such consideration shall be done by a registered valuer who shall submit a valuation report to the company giving justification for the valuation;
(j)where the preferential offer of shares is made for a non-cash consideration, such non-cash consideration shall be treated in the following manner in the books of account of the company—
(i)where the non-cash consideration takes the form of a depreciable or amortizable asset, it shall be carried to the balance sheet of the company in accordance with the accounting standards; or
(ii)where clause (i) is not applicable, it shall be expensed as provided in the accounting standards.

Issue of Bonus Shares

14. The company which has once announced the decision of its Board recommending a bonus issue, shall not subsequently withdraw the same.

Notice to Registrar for alteration of share capital

15. Where a company alters its share capital in any manner specified in sub-section (1) of section 61, or an order is passed by the Government increasing the authorized capital of the company in pursuance of sub-section (4) read with sub-section (6) of section 62 or a company redeems any redeemable preference shares, the notice of such alteration, increase or redemption shall be filed by the company with the Registrar in Form No. SH.7 along with the fee.

Provision of money by company for purchase of its own shares by employees or by trustees for the benefit of employees.

16. (1) The company shall not make a provision of money for the purchase of, or subscription for, shares in the company or its holding company, if the purchase of, or the subscription for, the shares by trustees is for the shares to be held by or for the benefit of the employees of the company, unless it complies with the following conditions, namely:—

(a)the scheme of provision of money for purchase of or subscription for the shares as aforesaid is approved by the members by passing special resolution in a general meeting;
(b)such purchase of shares shall be made only through a recognized stock exchange in case the shares of the company are listed and not by way of private offers or arrangements;
(c)where shares of a company are not listed on a recognized stock exchange, the valuation at which shares are to be purchased shall be made by a registered valuer;
(d)the value of shares to be purchased or subscribed in the aggregate together with the money provided by the company shall not exceed five per cent, of the aggregate of paid up capital and free reserves of the company.

(2) The explanatory statement to be annexed to the notice of the general meeting to be convened pursuant to section 102 shall, in addition to the particulars mentioned in sub-rule (1) of rule 18, contain the following particulars, namely:—

(a)the class of employees for whose benefit the scheme is being implemented and money is being provided for purchase of or subscription to shares;
(b)the particulars of the trustee or employees in whose favour such shares are to be registered;
(c)the particulars of trust and name, address, occupation and nationality of trustees and their relationship with the promoters, directors or key managerial personnel, if any;
(d)the any interest of key managerial personnel, directors or promoters in such scheme or trust and effect thereof;
(e)the detailed particulars of benefits which will accrue to the employees from the implementation of the scheme;
(f)the details about who would exercise and how the voting rights in respect of the shares to be purchased or subscribed under the scheme would be exercised;

(3) A person shall not be appointed as a trustee to hold such shares, if he—

(a)is a director, key managerial personnel or promoter of the company or its holding, subsidiary or associate company or any relative of such director, key managerial personnel or promoter; or
(b)beneficially holds ten per cent or more of the paid-up share capital of the company.

(4) Where the voting rights are not exercised directly by the employees in respect of shares to which the scheme relates, the Board of Directors shall, inter alia, disclose in the Board’s report for the relevant financial year the following details, namely:—

(a)the names of the employees who have not exercised the voting rights directly;
(b)the reasons for not voting directly;
(c)the name of the person who is exercising such voting rights;
(d)the number of shares held by or in favour of, such employees and the percentage of such shares to the total paid up share capital of the company;
(e)the date of the general meeting in which such voting power was exercised;
(f)the resolutions on which votes have been cast by persons holding such voting power;
(g)the percentage of such voting power to the total voting power on each resolution;
(h)whether the votes were cast in favour of or against the resolution.

Buy-back of shares or other securities.

17. Unless stated otherwise, the following norms shall be complied with by the private companies and unlisted public companies for buy-back of their securities—

(1) The explanatory statement to be annexed to the notice of the general meeting pursuant to section 102 shall contain the following disclosures, namely:—

(a)the date of the board meeting at which the proposal for buy-back was approved by the board of directors of the company;
(b)the objective of the buy-back;
(c)the class of shares or other securities intended to be purchased under the buy-back;
(d)the number of securities that the company proposes to buy-back;
(e)the method to be adopted for the buy-back;
(f)the price at which the buy-back of shares or other securities shall be made;
(g)the basis of arriving at the buy-back price;
(h)the maximum amount to be paid for the buy-back and the sources of funds from which the buy-back would be financed;
(i)the time-limit for the completion of buy-back;
(j)(i) the aggregate shareholding of the promoters and of the directors of the promoter, where the promoter is a company and of the directors and key managerial personnel as on the date of the notice convening the general meeting;
(ii) the aggregate number of equity shares purchased or sold by persons mentioned in sub-clause (i) during a period of twelve months preceding the date of the board meeting at which the buy-back was approved and from that date till the date of notice convening the general meeting;
(iii) the maximum and minimum price at which purchases and sales referred to in sub-clause (ii) were made along with the relevant date;
(k)if the persons mentioned in sub-clause (i) of clause (j) intend to tender their shares for buy-back—
(i)the quantum of shares proposed to be tendered;
(ii)the details of their transactions and their holdings for the last twelve months prior to the date of the board meeting at which the buy-back was approved including information of number of shares acquired, the price and the date of acquisition;
(l)a confirmation that there are no defaults subsisting in repayment of deposits, interest payment thereon, redemption of debentures or payment of interest thereon or redemption of preference shares or payment of dividend due to any shareholder, or repayment of any term loans or interest payable thereon to any financial institution or banking company;
(m)a confirmation that the Board of directors have made a full enquiry into the affairs and prospects of the company and that they have formed the opinion—
(i)that immediately following the date on which the general meeting is convened there shall be no grounds on which the company could be found unable to pay its debts;
(ii)as regards its prospects for the year immediately following that date, that, having regard to their intentions with respect to the management of the company’s business during that year and to the amount and character of the financial resources which will in their view be available to the company during that year, the company shall be able to meet its liabilities as and when they fall due and shall not be rendered insolvent within a period of one year from that date; and
(iii)the directors have taken into account the liabilities (including prospective and contingent liabilities),
as if the company were being wound up under the provisions of the Companies Act, 2013 a report addressed to the Board of directors by the company’s auditors stating that—
(i)they have inquired into the company’s state of affairs;
(ii)the amount of the permissible capital payment for the securities in question is in their view properly determined;
(iii)that the audited accounts on the basis of which calculation with reference to buy back is done is not more than six months old from the date of offer document; and
(iv)the Board of directors have formed the opinion as specified in clause (m) on reasonable grounds and that the company, having regard to its state of affairs, shall not be rendered insolvent within a period of one year from that date.

(2) The company which has been authorized by a special resolution shall, before the buy-back of shares, file with the Registrar of Companies a letter of offer in Form No. SH.8, along with the fee:

Provided that such letter of offer shall be dated and signed on behalf of the Board of directors of the company by not less than two directors of the company, one of whom shall be the managing director, where there is one.

(3) The company shall file with the Registrar, along with the letter of offer, and in case of a listed company with the Registrar and the Securities and Exchange Board, a declaration of solvency in Form No. SH.9 along with the fee and signed by at least two directors of the company, one of whom shall be the managing director, if any, and verified by an affidavit as specified in the said Form.

(4) The letter of offer shall be dispatched to the shareholders or security holders immediately after filing the same with the Registrar of Companies but not later than twenty days from its filing with the Registrar of Companies.

(5) The offer for buy-back shall remain open for a period of not less than fifteen days and not exceeding thirty days from the date of dispatch of the letter of offer.

(6) In case the number of shares or other specified securities offered by the shareholders or security holders is more than the total number of shares or securities to be bought back by the company, the acceptance per shareholder shall be on proportionate basis out of the total shares offered for being bought back.

(7) The company shall complete the verifications of the offers received within fifteen days from the date of closure of the offer and the shares or other securities lodged shall be deemed to be accepted unless a communication of rejection is made within twenty one days from the date of closure of the offer.

(8) The company shall immediately after the date of closure of the offer, open a separate bank account and deposit therein, such sum, as would make up the entire sum due and payable as consideration for the shares tendered for buy-back in terms of these rules.

(9) The company shall within seven days of the time specified in sub-rule (7) —

(a)make payment of consideration in cash to those shareholders or security holders whose securities have been accepted; or
(b)return the share certificates to the shareholders or security holders whose securities have not been accepted at all or the balance of securities in case of part acceptance.

(10) The company shall ensure that—

(a)the letter of offer shall contain true, factual and material information and shall not contain any misleading information and must state that the directors of the company accept the responsibility for the information contained in such document;
(b)the company shall not issue any new shares including by way of bonus shares from the date of passing of special resolution authorizing the buy-back till the date of the closure of the offer under these rules, except those arising out of any outstanding convertible instruments;
(c)the company shall confirm in its offer the opening of a separate bank account adequately funded for this purpose and to pay the consideration only by way of cash;
(d)the company shall not withdraw the offer once it has announced the offer to the shareholders;
(e)the company shall not utilize any money borrowed from banks or financial institutions for the purpose of buying back its shares; and
(f)the company shall not utilize the proceeds of an earlier issue of the same kind of shares or same kind of other specified securities for the buy-back.

(12)(a) The company, shall maintain a register of shares or other securities which have been bought-back inForm No. SH.10.

(b) The register of shares or securities bought-back shall be maintained at the registered office of the company and shall be kept in the custody of the secretary of the company or any other person authorized by the board in this behalf.

(c) The entries in the register shall be authenticated by the secretary of the company or by any other person authorized by the Board for the purpose.

(13) The company, after the completion of the buy-back under these rules, shall file with the Registrar, and in case of a listed company with the Registrar and the Securities and Exchange Board of India, a return in theForm No. SH.11 along with the fee .

(14) There shall be annexed to the return filed with the Registrar in Form No. SH.11, a certificate in Form No. SH.15 signed by two directors of the company including the managing director, if any, certifying that the buy-back of securities has been made in compliance with the provisions of the Act and the rules made thereunder.

Debentures

18. (1) The company shall not issue secured debentures, unless it complies with the following conditions, namely:—

(a)An issue of secured debentures may be made, provided the date of its redemption shall not exceed ten years from the date of issue :
Provided that a company engaged in the setting up of infrastructure projects may issue secured debentures for a period exceeding ten years but not exceeding thirty years;
(b)such an issue of debentures shall be secured by the creation of a charge, on the properties or assets of the company, having a value which is sufficient for the due repayment of the amount of debentures and interest thereon;
(c)the company shall appoint a debenture trustee before the issue of prospectus or letter of offer for subscription of its debentures and not later than sixty days after the allotment of the debentures, execute a debenture trust deed to protect the interest of the debenture holders; and
(d)the security for the debentures by way of a charge or mortgage shall be created in favour of the debenture trustee on—
(i)any specific movable property of the company (not being in the nature of pledge); or
(ii)any specific immovable property wherever situate, or any interest therein.

(2) The company shall appoint debenture trustees under sub-section (5) of section 71, after complying with the following conditions, namely:—

(a)the names of the debenture trustees shall be stated in letter of offer inviting subscription for debentures and also in all the subsequent notices or other communications sent to the debenture holders;
(b)before the appointment of debenture trustee or trustees, a written consent shall be obtained from such debenture trustee or trustees proposed to be appointed and a statement to that effect shall appear in the letter of offer issued for inviting the subscription of the debentures;
(c)A person shall not be appointed as a debenture trustee, if he—
(i)beneficially holds shares in the company;
(ii)is a promoter, director or key managerial personnel or any other officer or an employee of the company or its holding, subsidiary or associate company;
(iii)is beneficially entitled to moneys which are to be paid by the company otherwise than as remuneration payable to the debenture trustee;
(iv)is indebted to the company, or its subsidiary or its holding or associate company or a subsidiary of such holding company;
(v)has furnished any guarantee in respect of the principal debts secured by the debentures or interest thereon;
(vi)has any pecuniary relationship with the company amounting to two per cent or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year;
(vii)is relative of any promoter or any person who is in the employment of the company as a director or key managerial personnel.
(d)the Board may fill any casual vacancy in the office of the trustee but while any such vacancy continues, the remaining trustee or trustees, if any, may act:
Provided that where such vacancy is caused by the resignation of the debenture trustee, the vacancy shall only be filled with the written consent of the majority of the debenture holders.
(e)any debenture trustee may be removed from office before the expiry of his term only if it is approved by the holders of not less than three fourth in value of the debentures outstanding, at their meeting.

(3) It shall be the duty of every debenture trustee to—

(a)satisfy himself that the letter of offer does not contain any matter which is inconsistent with the terms of the issue of debentures or with the trust deed;
(b)satisfy himself that the covenants in the trust deed are not prejudicial to the interest of the debenture holders;
(c)call for periodical status or performance reports from the company;
(d)communicate promptly to the debenture holders defaults, if any, with regard to payment of interest or redemption of debentures and action taken by the trustee therefor;
(e)appoint a nominee director on the Board of the company in the event of—
(i)two consecutive defaults in payment of interest to the debenture holders; or
(ii)default in creation of security for debentures; or
(iii)default in redemption of debentures.
(f)ensure that the company does not commit any breach of the terms of issue of debentures or covenants of the trust deed and take such reasonable steps as may be necessary to remedy any such breach;
(g)inform the debenture holders immediately of any breach of the terms of issue of debentures or covenants of the trust deed;
(h)ensure the implementation of the conditions regarding creation of security for the debentures, if any, and debenture redemption reserve;
(i)ensure that the assets of the company issuing debentures and of the guarantors, if any, are sufficient to discharge the interest and principal amount at all times and that such assets are free from any other encumbrances except those which are specifically agreed to by the debenture holders;
(j)do such acts as are necessary in the event the security becomes enforceable;
(k)call for reports on the utilization of funds raised by the issue of debentures;
(l)take steps to convene a meeting of the holders of debentures as and when such meeting is required to be held;
(m)ensure that the debentures have been converted or redeemed in accordance with the terms of the issue of debentures;
(n)perform such acts as are necessary for the protection of the interest of the debenture holders and do all other acts as are necessary in order to resolve the grievances of the debenture holders.

(4) The meeting of all the debenture holders shall be convened by the debenture trustee on—

(a)requisition in writing signed by debenture holders holding at least one-tenth in value of the debentures for the time being outstanding;
(b)the happening of any event, which constitutes a breach, default or which in the opinion of the debenture trustees affects the interest of the debenture holders.

(5) For the purposes of sub-section (13) of section 71 and sub-rule (1) a trust deed in Form No. SH.12 or as near thereto as possible shall be executed by the company issuing debentures in favour of the debenture trustees within sixty days of allotment of debentures.

(6) The provisions of sub-rules (2) to (5) of rule 18 shall not be applicable to the public offer of debentures.

(7) The company shall create a Debenture Redemption Reserve for the purpose of redemption of debentures, in accordance with the conditions given below—

(a)the Debenture Redemption Reserve shall be created out of the profits of the company available for payment of dividend;
(b)the company shall create Debenture Redemption Reserve equivalent to at least fifty per cent of the amount raised through the debenture issue before debenture redemption commences.
(c)every company required to create Debenture Redemption Reserve shall on or before the 30th day of April in each year, invest or deposit, as the case may be, a sum which shall not be less than fifteen per cent of the amount of its debentures maturing during the year ending on the 31st day of March of the next year, in any one or more of the following methods, namely:—
(i) in deposits with any scheduled bank, free from any charge or lien;
(ii) in unencumbered securities of the Central Government or of any State Government;
(iii) in unencumbered securities mentioned in sub-clauses (a) to (d) and (ee) of section 20 of the Indian Trusts Act, 1882;
(iv) in unencumbered bonds issued by any other company which is notified under sub-clause(f) of section 20 of the Indian Trusts Act, 1882;
(v) the amount invested or deposited as above shall not be used for any purpose other than for redemption of debentures maturing during the year referred above:
Provided that the amount remaining invested or deposited, as the case may be, shall not at any time fall below fifteen per cent of the amount of the debentures maturing during the year ending on the 31st day of March of that year;
(d)in case of partly convertible debentures, Debenture Redemption Reserve shall be created in respect of non-convertible portion of debenture issue in accordance with this sub-rule.
(e)the amount credited to the Debenture Redemption Reserve shall not be utilised by the company except for the purpose of redemption of debentures.

(8) (a) A trust deed for securing any issue of debentures shall be open for inspection to any member or debenture holder of the company, in the same manner, to the same extent and on the payment of the same fees, as if it were the register of members of the company; and (b) A copy of the trust deed shall be forwarded to any member or debenture holder of the company, at his request, within seven days of the making thereof, on payment of fee.

Nomination by securities holders.

19. (1) Any holder of securities of a company may, at any time, nominate, in Form No. SH.13, any person as his nominee in whom the securities shall vest in the event of his death.

(2) On the receipt of the nomination form, a corresponding entry shall forthwith be made in the relevant register of securities holders, maintained under section 88.

(3) Where the nomination is made in respect of the securities held by more than one person jointly, all joint holders shall together nominate in Form No. SH.13 any person as nominee.

(4) The request for nomination should be recorded by the Company within a period of two months from the date of receipt of the duly filled and signed nomination form.

(5) In the event of death of the holder of securities or where the securities are held by more than one person jointly, in the event of death of all the joint holders, the person nominated as the nominee may upon the production of such evidence as may be required by the Board, elect, either—

(a)to register himself as holder of the securities; or
(b)to transfer the securities, as the deceased holder could have done.

(6) If the person being a nominee, so becoming entitled, elects to be registered as holder of the securities himself, he shall deliver or send to the company a notice in writing signed by him stating that he so elects and such notice shall be accompanied with the death certificate of the deceased share or debenture holder(s).

(7) All the limitations, restrictions and provisions of the Act relating to the right to transfer and the registration of transfers of securities shall be applicable to any such notice or transfer as aforesaid as if the death of the share or debenture holder had not occurred and the notice or transfer were a transfer signed by that shareholder or debenture holder, as the case may be.

(8) A person, being a nominee, becoming entitled to any securities by reason of the death of the holder shall be entitled to the same dividends or interests and other advantages to which he would have been entitled to if he were the registered holder of the securities except that he shall not, before being registered as a holder in respect of such securities, be entitled in respect of these securities to exercise any right conferred by the membership in relation to meetings of the company:

Provided that the Board may, at any time, give notice requiring any such person to elect either to be registered himself or to transfer the securities, and if the notice is not complied with within ninety days, the Board may thereafter withhold payment of all dividends or interests, bonuses or other moneys payable in respect of the securities, as the case may be, until the requirements of the notice have been complied with.

(9) A nomination may be cancelled, or varied by nominating any other person in place of the present nominee, by the holder of securities who has made the nomination, by giving a notice of such cancellation or variation, to the company in Form No. SH.14.

(10) The cancellation or variation shall take effect from the date on which the notice of such variation or cancellation is received by the company.

(11) Where the nominee is a minor, the holder of the securities, making the nomination, may appoint a person inForm No. SH.14 specified under sub-rule (1), who shall become entitled to the securities of the company, in the event of death of the nominee during his minority.

CHAPTER V : ACCEPTANCE OF DEPOSITS BY COMPANIES

COMPANIES (ACCEPTANCE OF DEPOSITS) RULES, 2014

In exercise of the powers conferred by clause (31) of section 2, section 73 and section 76 read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), and in supersession of the Companies (Acceptance of Deposits) Rules, 1975 or any other rules prescribed under the Companies Act, 1956 (1 of 1956) on matters covered under these rules except as respects things done or omitted to be done before such supersession, the Central Government, in consultation with the Reserve Bank of India, hereby makes the following rules, namely:—

Short title, commencement and application.

1. (1) These rules may be called the Companies (Acceptance of Deposits) Rules, 2014.

(2) They shall come into force on the 1st day of April, 2014.

(3) These rules shall apply to a company other than –

(i)a banking company;
(ii)a non-banking financial company as defined in the Reserve Bank of India Act, 1934 (2 of 1934) registered with the Reserve Bank of India;
(iii)a housing finance company registered with the National Housing Bank established under the National Housing Bank Act, 1987 (53 of 1987); and
(iv)a company specified by the Central Government under the proviso to sub-section (1) of section 73 of the Act.

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Annexure” means the Annexure attached to these rules;
(c)“deposit” includes any receipt of money by way of deposit or loan or in any other form, by a company, but does not include—
(i)any amount received from the Central Government or a State Government, or any amount received from any other source whose repayment is guaranteed by the Central Government or a State Government, or any amount received from a local authority, or any amount received from a statutory authority constituted under an Act of Parliament or a State Legislature ;
(ii)any amount received from foreign Governments, foreign or international banks, multilateral financial institutions (including, but not limited to, International Finance Corporation, Asian Development Bank, Commonwealth Development Corporation and International Bank for Industrial and Financial Reconstruction), foreign Governments owned development financial institutions, foreign export credit agencies, foreign collaborators, foreign bodies corporate and foreign citizens, foreign authorities or persons resident outside India subject to the provisions of Foreign Exchange Management Act, 1999 (42 of 1999) and rules and regulations made thereunder;
(iii)any amount received as a loan or facility from any banking company or from the State Bank of India or any of its subsidiary banks or from a banking institution notified by the Central Government under section 51 of the Banking Regulation Act, 1949 (10 of 1949), or a corresponding new bank as defined in clause (d) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) or in clause (b) of section (2) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or from a co-operative bank as defined in clause (b-ii) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934) ;
(iv)any amount received as a loan or financial assistance from Public Financial Institutions notified by the Central Government in this behalf in consultation with the Reserve Bank of India or any regional financial institutions or Insurance Companies or Scheduled Banks as defined in the Reserve Bank of India Act, 1934 (2 of 1934);
(v)any amount received against issue of commercial paper or any other instruments issued in accordance with the guidelines or notification issued by the Reserve Bank of India;
(vi)any amount received by a company from any other company;
(vii)any amount received and held pursuant to an offer made in accordance with the provisions of the Act towards subscription to any securities, including share application money or advance towards allotment of securities pending allotment, so long as such amount is appropriated only against the amount due on allotment of the securities applied for;
Explanation.—For the purposes of this sub-clause, it is hereby clarified that –
(a)Without prejudice to any other liability or action, if the securities for which application money or advance for such securities was received cannot be allotted within sixty days from the date of receipt of the application money or advance for such securities and such application money or advance is not refunded to the subscribers within fifteen days from the date of completion of sixty days, such amount shall be treated as a deposit under these rules.
(b)Any adjustment of the amount for any other purpose shall not be treated as refund.
(viii)any amount received from a person who, at the time of the receipt of the amount, was a director of the company:
Provided that the director from whom money is received, furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others;
(ix)any amount raised by the issue of bonds or debentures secured by a first charge or a charge ranking pari passu with the first charge on any assets referred to in Schedule III of the Act excluding intangible assets of the company or bonds or debentures compulsorily convertible into shares of the company within five years:
Provided that if such bonds or debentures are secured by the charge of any assets referred to in Schedule III of the Act, excluding intangible assets, the amount of such bonds or debentures shall not exceed the market value of such assets as assessed by a registered valuer;
(x)any amount received from an employee of the company not exceeding his annual salary under a contract of employment with the company in the nature of non-interest bearing security deposit;
(xi)any non-interest bearing amount received or held in trust;
(xii)any amount received in the course of, or for the purposes of, the business of the company,—
(a)as an advance for the supply of goods or provision of services accounted for in any manner whatsoever provided that such advance is appropriated against supply of goods or provision of services within a period of three hundred and sixty five days from the date of acceptance of such advance:
Provided that in case of any advance which is subject matter of any legal proceedings before any court of law, the said time limit of three hundred and sixty five days shall not apply:
(b)as advance, accounted for in any manner whatsoever, received in connection with consideration for property under an agreement or arrangement, provided that such advance is adjusted against the property in accordance with the terms of agreement or arrangement;
(c)as security deposit for the performance of the contract for supply of goods or provision of services;
(d)as advance received under long term projects for supply of capital goods except those covered under item (b) above:
Provided that if the amount received under items (a), (b) and (d) above becomes refundable (with or without interest) due to the reasons that the company accepting the money does not have necessary permission or approval, wherever required, to deal in the goods or properties or services for which the money is taken, then the amount received shall be deemed to be a deposit under these rules:
Explanation.—For the purposes of this sub-clause the amount referred to in the first proviso shall be deemed to be deposits on the expiry of fifteen days from the date they become due for refund.
(xiii)any amount brought in by the promoters of the company by way of unsecured loan in pursuance of the stipulation of any lending financial institution or a bank subject to fulfilment of the following conditions, namely:—
(a)the loan is brought in pursuance of the stipulation imposed by the lending institutions on the promoters to contribute such finance;
(b)the loan is provided by the promoters themselves or by their relatives or by both; and
(c)the exemption under this sub-clause shall be available only till the loans of financial institution or bank are repaid and not thereafter;
(xiv)any amount accepted by a Nidhi company in accordance with the rules made under section 406 of the Act.
Explanation.—For the purposes of this clause, any amount.—
(a)received by the company, whether in the form of instalments or otherwise, from a person with promise or offer to give returns, in cash or in kind, on completion of the period specified in the promise or offer, or earlier, accounted for in any manner whatsoever, or
(b)any additional contributions, over and above the amount under item (a) above, made by the company as part of such promise or offer,
shall be treated as a deposit;
(d)”depositor” means,—
(i)any member of the company who has made a deposit with the company in accordance with the provisions of sub-section (2) of section 73 of the Act, or
(ii)any person who has made a deposit with a public company in accordance with the provisions of section 76 of the Act;
(e)“eligible company” means a public company as referred to in sub-section (1) of section 76, having a net worth of not less than one hundred crore rupees or a turnover of not less than five hundred crore rupees and which has obtained the prior consent of the company in general meeting by means of a special resolution and also filed the said resolution with the Registrar of Companies before making any invitation to the Public for acceptance of deposits:
Provided that an eligible company, which is accepting deposits within the limits specified under clause(c) of sub-section (1) of section 180, may accept deposits by means of an ordinary resolution;
(f)“fees” means fees as specified in the Companies (Registration Offices and Fees) Rules, 2014;
(g)“Form” or “e-Form” means a form set forth in Annexure to these rules which shall be used for the matter to which it relates;
(h)“section” means section of the Act;
(i)“trustee” means the trustee as defined in section 3 of the Indian Trusts Act, 1882 (12 of 1882).

(2) Words and expressions used in these rules but not defined and defined in the Act or in the Reserve Bank of India Act, 1934 (2 of 1934) or in the Companies (Specification of Definitions Details) Rules, 2014, shall have the meanings respectively assigned to them in the said Acts or in the said rules.

Terms and conditions of acceptance of deposits by companies.

3. (1) On and from the commencement of these rules,—

(a)no company referred to in sub-section (2) of section 73 and no eligible company shall accept or renew any deposit, whether secured or unsecured, which is repayable on demand or upon receiving a notice within a period of less than six months or more than thirty-six months from the date of acceptance or renewal of such deposit:
Provided that a company may, for the purpose of meeting any of its short-term requirements of funds, accept or renew such deposits for repayment earlier than six months from the date of deposit or renewal, as the case may be, subject to the condition that-(a) such deposits shall not exceed ten per cent of the aggregate of the paid up share capital and free reserves of the company, and
(b)such deposits are repayable not earlier than three months from the date of such deposits or renewal thereof.

(2) Where depositors so desire, deposits may be accepted in joint names not exceeding three, with or without any of the clauses, namely, “Jointly”, “Either or Survivor”, “First named or Survivor”, “Anyone or Survivor”.

(3) No company referred to in sub-section (2) of section 73 shall accept or renew any deposit from its members, if the amount of such deposits together with the amount of other deposits outstanding as on the date of acceptance or renewal of such deposits exceeds twenty five per cent of the aggregate of the paid-up share capital and free reserves of the company.

(4) No eligible company shall accept or renew—

(a)any deposit from its members, if the amount of such deposit together with the amount of deposits outstanding as on the date of acceptance or renewal of such deposits from members exceeds ten per cent of the aggregate of the paid-up share capital and free reserves of the company;
(b)any other deposit, if the amount of such deposit together with the amount of such other deposits, other than the deposit referred to in clause (a), outstanding on the date of acceptance or renewal exceeds twenty-five per cent of aggregate of the paid-up share capital and free reserves of the company.

(5) No Government company eligible to accept deposits under section 76 shall accept or renew any deposit, if the amount of such deposits together with the amount of other deposits outstanding as on the date of acceptance or renewal exceeds thirty five per cent of the aggregate of its paid up share capital and free reserves of the company.

(6) No company referred to in sub-section (2) of section 73 or any eligible company shall invite or accept or renew any deposit in any form, carrying a rate of interest or pay brokerage thereon at a rate exceeding the maximum rate of interest or brokerage prescribed by the Reserve Bank of India for acceptance of deposits by non-banking financial companies.

Explanation.—For the purposes of this sub-rule, it is hereby clarified that the person who is authorised, in writing, by a company to solicit deposits on its behalf and through whom deposits are actually procured shall only be entitled to the brokerage and payment of brokerage to any other person for procuring deposits shall be deemed to be in violation of these rules.

(7) The company shall not reserve to itself either directly or indirectly a right to alter, to the prejudice or disadvantage of the depositor, any of the terms and conditions of the deposit, deposit trust deed and deposit insurance contract after circular or circular in the form of advertisement is issued and deposits are accepted.

Form and particulars of advertisements or circulars.

4. (1) Every company referred to in sub-section (2) of section 73 intending to invite deposit from its members shall issue a circular to all its members by registered post with acknowledgement due or speed post or by electronic mode in Form DPT-1:

Provided that in addition to issue of such circular to all members in the manner specified above, the circular may be published in English language in an English newspaper and in vernacular language in a vernacular newspaper having wide circulation in the State in which the registered office of the company is situated.

(2) Every eligible company intending to invite deposits shall issue a circular in the form of an advertisement in Form DPT-1 for the purpose in English language in an English newspaper and in vernacular language in one vernacular newspaper having wide circulation in the State in which the registered office of the company is situated.

(3) Every company inviting deposits from the public shall upload a copy of the circular on its website, if any.

(4) No company shall issue or allow any other person to issue or cause to be issued on its behalf, any circular or a circular in the form of advertisement inviting deposits, unless such circular or circular in the form of advertisement is issued on the authority and in the name of the Board of directors of the company.

(5) No circular or a circular in the form of advertisement shall be issued by or on behalf of a company unless, not less than thirty days before the date of such issue, there has been delivered to the Registrar for registration a copy thereof signed by a majority of the directors of the company as constituted at the time the Board approved the circular or circular in the form of advertisement, or their agents, duly authorised by them in writing.

(6) A circular or circular in the form of advertisement issued shall be valid until the expiry of six months from the date of closure of the financial year in which it is issued or until the date on which the financial statement is laid before the company in annual general meeting or, where the annual general meeting for any year has not been held, the latest day on which that meeting should have been held in accordance with the provisions of the Act, whichever is earlier, and a fresh circular or circular in the form of advertisement shall be issued, in each succeeding financial year, for inviting deposits during that financial year.

Explanation.—For the purpose of this rule, the date of the issue of the newspaper in which the advertisement appears shall be taken as the date of issue of the advertisement and the effective date of issue of circular shall be the date of dispatch of the circular.

Manner and extent of deposit insurance.

5. (1) Every company referred to in sub-section (2) of section 73 and every other eligible company inviting deposits shall enter into a contract for providing deposit insurance at least thirty days before the issue of circular or advertisement or at least thirty days before the date of renewal, as the case may be.

Explanation.—For the purposes of this sub-rule, the amount as specified in the deposit insurance contract shall be deemed to be the amount in respect of both principal amount and interest due thereon.

(2) The deposit insurance contract shall specifically provide that in case the company defaults in repayment of principal amount and interest thereon, the depositor shall be entitled to the repayment of principal amount of deposits and the interest thereon by the insurer up to the aggregate monetary ceiling as specified in the contract:

Provided that in the case of any deposit and interest not exceeding twenty thousand rupees, the deposit insurance contract shall provide for payment of the full amount of the deposit and interest and in the case of any deposit and the interest thereon in excess of twenty thousand rupees, the deposit insurance contract shall provide for payment of an amount not less than twenty thousand rupees for each depositor.

(3) The amount of insurance premium paid on the insurance of such deposits shall be borne by the company itself and shall not be recovered from the depositors by deducting the same from the principal amount or interest payable thereon.

(4) If any default is made by the company in complying with the terms and conditions of the deposit insurance contract which makes the insurance cover ineffective, the company shall either rectify the default immediately or enter into a fresh contract within thirty days and in case of non-compliance, the amount of deposits covered under the deposit insurance contract and interest payable thereon shall be repaid within the next fifteen days and if such a company does not repay the amount of deposits within said fifteen days it shall pay fifteen per cent interest per annum for the period of delay and shall be treated as having defaulted and shall be liable to be punished in accordance with the provisions of the Act.

Creation of security.

6. (1) For the purposes of providing security, every company referred to in sub-section (2) of section 73 and every eligible company inviting secured deposits shall provide for security by way of a charge on its assets as referred to in Schedule III of the Act excluding intangible assets of the company for the due repayment of the amount of deposit and interest thereon for an amount which shall not be less than the amount remaining unsecured by the deposit insurance:

Provided that in the case of deposits which are secured by the charge on the assets referred to in Schedule III of the Act excluding intangible assets, the amount of such deposits and the interest payable thereon shall not exceed the market value of such assets as assessed by a registered valuer.

Explanation I.—For the purposes of this sub-rule it is clarified that the company shall ensure that the total value of the security either by way of deposit insurance or by way of charge or by both on company’s assets shall not be less than the amount of deposits accepted and the interest payable thereon.

Explanation II.—For the purposes of proviso to sub-clause (ix) of clause (c) of sub-rule (1) of rule 2 and this sub-rule, it is hereby clarified that pending notification of sub-section (1) of section 247 of the Act and finalisation of qualifications and experience of valuers, valuation of stocks, shares, debentures, securities etc. shall be conducted by an independent merchant banker who is registered with the Securities and Exchange Board of India or an independent chartered accountant in practice having a minimum experience of ten years.

(2) The security (not being in the nature of a pledge) for deposits as specified in sub-rule (1) shall be created in favour of a trustee for the depositors on:

(a)specific movable property of the company, or
(b)specific immovable property of the company wherever situated, or any interest therein.

Appointment of trustee for depositors.

7. (1) No company referred to in sub-section (2) of section 73 or any eligible company shall issue a circular or advertisement inviting secured deposits unless the company has appointed one or more trustees for depositors for creating security for the deposits:

Provided that a written consent shall be obtained from the trustee for depositors before their appointment and a statement shall appear in the circular or circular in the form of advertisement with reasonable prominence to the effect that the trustees for depositors have given their consent to the company to be so appointed.

(2) The company shall execute a deposit trust deed in Form DPT-2 at least seven days before issuing the circular or circular in the form of advertisement.

(3) No person including a company that is in the business of providing trusteeship services shall be appointed as a trustee for the depositors, if the proposed trustee—

(a)is a director, key managerial personnel or any other officer or an employee of the company or of its holding, subsidiary or associate company or a depositor in the company;
(b)is indebted to the company, or its subsidiary or its holding or associate company or a subsidiary of such holding company;
(c)has any material pecuniary relationship with the company;
(d)has entered into any guarantee arrangement in respect of principal debts secured by the deposits or interest thereon;
(e)is related to any person specified in clause (a) above.

(4) No trustee for depositors shall be removed from office after the issue of circular or advertisement and before the expiry of his term except with the consent of all the directors present at a meeting of the board.

Provided that in case the company is required to have independent directors, at least one independent director shall be present in such meeting of the Board.

Duties of trustees.

8. It shall be the duty of every trustee for depositors to—

(a)ensure that the assets of the company on which charge is created together with the amount of deposit insurance are sufficient to cover the repayment of the principal amount of secured deposits outstanding and interest accrued thereon;
(b)satisfy himself that the circular or advertisement inviting deposits does not contain any information which is inconsistent with the terms of the deposit scheme or with the trust deed and is in compliance with the rules and provisions of the Act;
(c)ensure that the company does not commit any breach of covenants and provisions of the trust deed;
(d)take such reasonable steps as may be necessary to procure a remedy for any breach of covenants of the trust deed or the terms of invitation of deposits;
(e)take steps to call a meeting of the holders of depositors as and when such meeting is required to be held;
(f)supervise the implementation of the conditions regarding creation of security for deposits and the terms of deposit insurance;
(g)do such acts as are necessary in the event the security becomes enforceable;
(h)carry out such acts as are necessary for the protection of the interest of depositors and to resolve their grievances.

Meeting of depositors.

9. The trustee for depositors shall call a meeting of all the depositors on—

(a)requisition in writing signed by at least one-tenth of the depositors in value for the time being outstanding;
(b)the happening of any event, which constitutes a default or which, in the opinion of the trustee for depositors, affects the interest of the depositors.

Form of application for deposits.

10. (1) On and from the commencement of these rules, no company shall accept, or renew any deposit, whether secured or unsecured, unless an application, in such form as specified by the company, is submitted by the intending depositor for the acceptance of such deposit.

(2) The form of application referred to in sub-rule (1) shall contain a declaration by the intending depositor to the effect that the deposit is not being made out of any money borrowed by him from any other person.

Power to nominate.

11. Every depositor may, at any time, nominate any person to whom his deposits shall vest in the event of his death and the provisions of section 72 shall, as far as may be, apply to the nomination made under this rule.

Furnishing of deposit receipts to depositors.

12. (1) Every company shall, on the acceptance or renewal of a deposit, furnish to the depositor or his agent a receipt for the amount received by the company, within a period of twenty one days from the date of receipt of money or realisation of cheque or date of renewal.

(2) The receipt referred to in sub-rule (1) shall be signed by an officer of the company duly authorised by the Board in this behalf and shall state the date of deposit, the name and address of the depositor, the amount received by the company as deposit, the rate of interest payable thereon and the date on which the deposit is repayable.

Maintenance of liquid assets and creation of deposit repayment reserve account.

13. Every company referred to in sub-section (2) of section 73 and every eligible company shall on or before the 30th day of April of each year deposit the sum as specified in clause (c) of the said sub-section with any scheduled bank and the amount so deposited shall not be utilised for any purpose other than for the repayment of deposits:

Provided that the amount remaining deposited shall not at any time fall below fifteen per cent of the amount of deposits maturing, until the end of the current financial year and the next financial year.

Registers of deposits.

14. (1) Every company accepting deposits shall maintain at its registered office one or more separate registers for deposits accepted or renewed, in which there shall be entered separately in the case of each depositor the following particulars, namely:—

(a)name, address and PAN of the depositor/s;
(b)particulars of guardian, in case of a minor;
(c)particulars of the nominee;
(d)deposit receipt number;
(e)date and the amount of each deposit;
(f)duration of the deposit and the date on which each deposit is repayable;
(g)rate of interest or such deposits to be payable to the depositor;
(h)due date for payment of interest;
(i)mandate and instructions for payment of interest and for non-deduction of tax at source, if any;
(j)date or dates on which the payment of interest shall be made;
(k)details of deposit insurance including extent of deposit insurance;
(l)particulars of security or charge created for repayment of deposits;
(m)any other relevant particulars;

(2) The entries specified in sub-rule (1) shall be made within seven days from the date of issuance of the receipt duly authenticated by a director or secretary of the company or by any other officer authorised by the Board for this purpose.

(3) The register referred to in sub-rule (1) shall be preserved in good order for a period of not less than eight years from the financial year in which the latest entry is made in the register.

General provisions regarding premature repayment of deposits.

15. Where a company makes a repayment of deposits, on the request of the depositor, after the expiry of a period of six months from the date of such deposit but before the expiry of the period for which such deposit was accepted, the rate of interest payable on such deposit shall be reduced by one per cent from the rate which the company would have paid had the deposit been accepted for the period for which such deposit had actually run and the company shall not pay interest at any rate higher than the rate so reduced :

Provided that nothing contained in this rule shall apply to the repayment of any deposit before the expiry of the period for which such deposit was accepted by the company, if such repayment is made solely for the purpose of—

(a)complying with the provisions of rule 3; or
(b)providing war risk or other related benefits to the personnel of the naval, military or air forces or to their families, on an application made by the associations or societies formed by such personnel, during the period of emergency declared under article 352 of the Constitution :
Provided further that where a company referred to in under sub-section (2) of section 73 or any eligible company permits a depositor to renew his deposit, before the expiry of the period for which such deposit was accepted by the company, for availing of a higher rate of interest, the company shall pay interest to such depositor at the higher rate if such deposit is renewed in accordance with the other provisions of these rules and for a period longer than the unexpired period of the deposit.

Explanation.—For the purposes of this rule, where the period for which the deposit had run contains any part of a year, then, if such part is less than six months, it shall be excluded and if such part is six months or more, it shall be reckoned as one year.

Return of deposits to be filed with the Registrar.

16. Every company to which these rules apply, shall on or before the 30th day of June, of every year, file with the Registrar, a return in Form DPT-3 along with the fee as provided in Companies (Registration Offices and Fees) Rules, 2014 and furnish the information contained therein as on the 31st day of March of that year duly audited by the auditor of the company.

Penal rate of interest.

17. Every company shall pay a penal rate of interest of eighteen per cent per annum for the overdue period in case of deposits, whether secured or unsecured, matured and claimed but remaining unpaid.

Power of Central Government to decide certain questions.

18. If any question arises as to the applicability of these rules to a particular company, such question shall be decided by the Central Government in consultation with the Reserve Bank of India.

Applicability of sections 73 and 74 to eligible companies.

19. Pursuant to provisions of sub-section (2) of section 76 of the Act, the provisions of sections 73 and 74 shall,mutatis mutandis, apply to acceptance of deposits from public by eligible companies.

Explanation.—For the purposes of this rule, it is hereby clarified that in case of a company which had accepted or invited public deposits under the relevant provisions of the Companies Act, 1956 and rules made under that Act (hereinafter known as “Earlier Deposits”) and has been repaying such deposits and interest thereon in accordance with such provisions, the provisions of clause (b) of sub-section (1) of section 74 of the Act shall be deemed to have been complied with if the company complies with requirements under the Act and these rules and continues to repay such deposits and interest due thereon on due dates for the remaining period of such deposit in accordance with the terms and conditions and period of such Earlier Deposits and in compliance with the requirements under the Act and these rules:

Provided further that the fresh deposits by every eligible company shall have to be in accordance with the provisions of Chapter V of the Act and these rules.

Statement regarding deposits existing as on the date of commencement of the Act.

20. For the purposes of clause (a) of sub-section (1) of section 74, the statement shall be in Form DPT-4.

Punishment for contravention.

21. If any company referred to in sub-section (2) of section 73 or any eligible company inviting deposits or any other person contravenes any provision of these rules for which no punishment is provided in the Act, the company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day after the first day during which the contravention continues.

CHAPTER VI : REGISTRATION OF CHARGES

COMPANIES (REGISTRATION OF CHARGES) RULES, 2014

In exercise of the powers conferred under sections 77, 78, 79, 81, 82, 83, 84, 85 & 87, read with section 469 of the Companies Act, 2013 (18 of 2013) and in supersession of the Companies (Central Government’s) General Rules and Forms, 1956 or any other relevant rules prescribed under the Companies Act, 1956 (1 of 1956) on matters covered under these rules, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called the Companies (Registration of Charges) Rules, 2014.

(2) They shall come into force on the date of their publication in the Official Gazette.

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Annexure” means the Annexure appended to these rules;
(c)“Fees” means the fees as specified in the Companies (Registration Offices and Fees) Rules, 2014;
(d)“Form” or “e-forms” means form set forth in Annexure to these rules which shall be used for the matter to which it relates;
(e)“Regional Director” means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional Director;
(f)“section” means the section of the Act.

(2) Words and expressions used in these rules but not defined and defined in the Act or in Companies (Specification of Definitions Details) Rules, 2014 shall have the meanings respectively assigned to them in the Act and said rules.

Registration of creation or modification of charge.

3. (1) For registration of charge as provided in sub-section (1) of section 77, section 78 and section 79, the particulars of the charge together with a copy of the instrument, if any, creating or modifying the charge in Form No. CHG-1 (for other than Debentures) or Form No. CHG-9 (for debentures including rectification), as the case may be, duly signed by the company and the charge holder and filed with the Registrar within a period of thirty days of the date of creation or modification of charge along with the fee.

(2) If the particulars of a charge are not filed within the aforesaid period, but filed within a period of three hundred days of the date of such creation or modification, the additional fee shall be levied.

(3) If the company fails to register the particulars of the charge with the Registrar within the period of thirty days of its creation or modification, the particulars of the charge together with a copy of the instrument, if any, creating or modifying such charge may be filed by the charge-holder, in Form No. CHG-1 or Form No. CHG-9, as the case may be, duly signed along with fee.

(4) A copy of every instrument evidencing any creation or modification of charge and required to be filed with the Registrar in pursuance of section 77, 78 or 79 shall be verified as follows—

(a)where the instrument or deed relates solely to the property situated outside India, the copy shall be verified by a certificate issued either under the seal of the company, or under the hand of any director or company secretary of the company or an authorised officer of the charge holder or under the hand of some person other than the company who is interested in the mortgage or charge;
(b)where the instrument or deed relates, whether wholly or partly, to the property situated in India, the copy shall be verified by a certificate issued under the hand of any director or company secretary of the company or an authorised officer of the charge holder.

Condonation of delay by Registrar.

4. (1) The Registrar may, on being satisfied that the company had sufficient cause for not filing the particulars and instrument of charge, if any, within a period of thirty days of the date of creation of the charge, allow the registration of the same after thirty days but within a period of three hundred days of the date of such creation of charge or modification of charge on payment of additional fee.

(2) The application for delay shall be made in Form No. CHG-10 and supported by a declaration from the company signed by its secretary or director that such belated filing shall not adversely affect rights of any other intervening creditors of the company.

Application of rules in certain matters.

5. The provisions of rule 4 shall apply, mutatis mutandis, to the registration of charge on any property acquired subject to such charge and modification of charge under section 79 of the Act.

Certificate of registration.

6. (1) Where a charge is registered with the Registrar under sub-section (1) of section 77 or section 78, he shall issue a certificate of registration of such charge in Form No. CHG-2

(2) Where the particulars of modification of charge is registered under section 79, the Registrar shall issue a certificate of modification of charge in Form No. CHG-3

(3) The certificate issued by the Registrar under sub-rule (1) and sub-rule (2) shall be conclusive evidence that the requirements of Chapter VI of the Act and the rules made thereunder as to registration of creation or modification of charge, as the case may be, have been complied with.

Register of charges to be kept by the Registrar.

7. (1) The particulars of charges maintained on the Ministry of Corporate Affairs portal (www.mca.gov.in/MCA21) shall be deemed to be the register of charges for the purposes of section 81 of the Act.

(2) The register shall be open to inspection by any person on payment of fee.

Satisfaction of charge.

8. (1) A company shall within a period of thirty days from the date of the payment or satisfaction in full of any charge registered under Chapter VI, give intimation of the same to the Registrar in Form No.CHG-4 along with the fee.

(2) Where the Registrar enters a memorandum of satisfaction of charge in full in pursuance of section 82 or 83, he shall issue a certificate of registration of satisfaction of charge in Form No. CHG-5.

Intimation of appointment of Receiver or Manager.

9. The notice of appointment or cessation of a receiver of, or of a person to manage, the property, subject to charge, of a company shall be filed with the Registrar in Form No. CHG.6 along with fee.

Company’s register of charges.

10. (1) Every company shall keep at its registered office a register of charges in Form No. CHG.7 and enter therein particulars of all the charges registered with the Registrar on any of the property, assets or undertaking of the company and the particulars of any property acquired subject to a charge as well as particulars of any modification of a charge and satisfaction of charge.

(2) The entries in the register of charges maintained by the company shall be made forthwith after the creation, modification or satisfaction of charge, as the case may be.

(3) Entries in the register shall be authenticated by a director or the secretary of the company or any other person authorised by the Board for the purpose.

(4) The register of charges shall be preserved permanently and the instrument creating a charge or modification thereon shall be preserved for a period of eight years from the date of satisfaction of charge by the company.

Register open for inspection.

11. The register of charges and the instrument of charges kept by the company shall be open for inspection—

(a)by any member or creditor of the company without fees;
(b)by any other person on payment of fee.

Condonation of delay and rectification of register of charges.

12. (1) Where the instrument creating or modifying a charge is not filed within a period of three hundred days from the date of its creation (including acquisition of a property subject to a charge) or modification and where the satisfaction of the charge is not filed within thirty days from the date on which such payment of satisfaction, the Registrar shall not register the same unless the delay is condoned by the Central Government.

(2) The application for condonation of delay and for such other matters covered in sub-clauses (a), (b) and (c) ofclause (i) of sub-section (1) of section 87 of the Act shall be filed with the Central Government in Form No. CHG-8 along with the fee.

(3) The order passed by the Central Government under sub-section (1) of section 87 of the Act shall be required to be filed with the Registrar in Form No. INC.28 along with the fee as per the conditions stipulated in the said order.

CHAPTER VII : MANAGEMENT AND ADMINISTRATION

COMPANIES (MANAGEMENT AND ADMINISTRATION) RULES, 2014

In exercise of the powers conferred under sub-section (1) of section 88, sub-section (4) of section 88, sub-section (1) of section 89, sub-section (2) of section 89, sub-section (6) of section 89, sub-section (1) of section 91, sub-section (2) of section 92, sub-section (3) of section 92, sub-section (2) of section 92, section 93, sub-section (1) of section 94, sub-section (4) of section 100, sub-section (2) of section 114, sections 102, 101, 105, 108, sub-section (5) of section 109, sections 112, 113, 110, sub-section (3) of section 186, section 115, sub-section (1) of section 117, sub-section (1) of section 118, sub-section (2) of section 119, section 120 and sub-section (1) of section 121, read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013) and in supersession of Companies (Central Government’s) General Rules and Forms, 1956 or any other relevant rules prescribed under the Companies Act, 1956 (1 of 1956) on matters covered under these rules, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called the Companies (Management and Administration) Rules, 2014.

(2) They shall come into force on the date of their publication in the Official Gazette.

Definitions.

2. (1) In these rules, unless the context otherwise requires,

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Annexure” means the Annexure to these Rules;
(c)“Fees” means the fees as specified in the Companies (Registration Offices and Fees) Rules, 2014;
(d)“Form” or an e-form means an form set forth in Annexure to these rules which shall be used for the matter to which it relates;
(e)“Regional Director” means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional Director;
(f)“section” means section of the Act;

(2) Words and expressions used in these rules but not defined and defined in the Act or in Companies (Specification of Definitions Details) Rules, 2014 shall have the meanings respectively assigned to them in the Act and said rules.

Register of members.

3. (1) Every company limited by shares shall, from the date of its registration, maintain a register of its members in Form No. MGT. 1 :

Provided that in the case of existing companies, registered under the Companies Act, 1956, particulars shall be compiled within six months from the date of commencement of these rules.

(2) In the case of a company not having share capital, the register of members shall contain the following particulars, in respect of each member, namely:—

(a)name of the member; address (registered office address in case the member is a body corporate); e-mail address; Permanent Account Number or CIN; Unique Identification Number, if any; Father’s/Mother’s/Spouse’s name; Occupation; Status; Nationality; in case member is a minor, name of the guardian and the date of birth of the member; name and address of nominee;
(b)date of becoming member;
(c)date of cessation;
(d)amount of guarantee, if any;
(e)any other interest if any; and
(f)instructions, if any, given by the member with regard to sending of notices etc. :

Provided that in the case of existing companies, registered under the Companies Act, 1956, particulars shall be compiled within six months from the date of commencement of these rules.

Register of debenture holders or any other security holders.

4. Every company which issues or allots debentures or any other security shall maintain a separate register of debenture holders or security holders, as the case may be, for each type of debentures or other securities in Form No. MGT.2.

Maintenance of the Register of members etc. under section 88.

5. Every company shall maintain the registers under clauses (a), (b) and (c) of sub-section (1) of section 88 in the following manner, namely:—

(1)The entries in the registers maintained under section 88 shall be made within seven days after the Board of Directors or its duly constituted committee approves the allotment or transfer of shares, debentures or any other securities, as the case may be.
(2)The registers shall be maintained at the registered office of the company unless a special resolution is passed in a general meeting authorising the keeping of the register at any other place within the city, town or village in which the registered office is situated or any other place in India in which more than one-tenth of the total members entered in the register of members reside.
(3)Consequent upon any forfeiture, buy-back, reduction, sub-division, consolidation or cancellation of shares, issue of sweat equity shares, transmission of shares, shares issued under any scheme of arrangements, mergers, reconstitution or employees stock option scheme or any of such scheme provided under this Act or by issue of duplicate or new share certificates or new debenture or other security certificates, entry shall be made within seven days after approval by the Board or committee, in the register of members or in the respective registers, as the case may be.
(4)If any change occurs in the status of a member or debenture holder or any other security holder whether due to death or insolvency or change of name or due to transfer to Investor Education Protection Fund or due to any other reason, entries thereof explaining the change shall be made in the respective register.
(5)If any rectification is made in the register maintained under section 88 by the company pursuant to any order passed by the competent authority under the Act, the necessary reference of such order shall be indicated in the respective register.
(6)If any order is passed by any judicial or revenue authority or by Securities and Exchange Board of India (SEBI) or Tribunal attaching the shares, debentures or other securities and giving directions for remittance of dividend or interest, the necessary reference of such order shall be indicated in the respective register.
(7)In case of companies whose securities are listed on a stock exchange in or outside India, the particulars of any pledge, charge, lien or hypothecation created by the promoters in respect of any securities of the company held by the promoter including the names of pledgee/pawnee and any revocation therein shall be entered in the register within fifteen days from such an event.
(8)If promoters of any listed company, which has formed a joint venture company with another company have pledged or hypthoticated or created charge or lien in respect of any security of the listed company in connection with such joint venture company, the particulars of such pledge, hypothecation, charge and lien shall be entered in the register members of the listed company within fifteen days from such an event.

Index of names to be included in Register.

6. (1) Every register maintained under sub-section (1) of section 88 shall include an index of the names entered in the respective registers and the index shall, in respect of each folio, contain sufficient indication to enable the entries relating to that folio in the register to be readily found :

Provided that the maintenance of index is not necessary in case the number of members is less than fifty.

(2) The company shall make the necessary entries in the index simultaneously with the entry for allotment or transfer of any security in such Register.

Foreign register of members, debenture holders, other security holders or beneficial owners residing outside India.

7. (1) A company which has share capital or which has issued debentures or any other security may, if so authorised by its articles, keep in any country outside India, a part of the register of members or as the case may be, of debenture holders or of any other security holders or of beneficial owners, resident in that country (hereafter in this rule referred to as the “foreign register”).

(2) The company shall, within thirty days from the date of the opening of any foreign register, file with the Registrar notice of the situation of the office in Form No. MGT.3 along with the fee where such register is kept; and in the event of any change in the situation of such office or of its discontinuance, shall, within thirty days from the date of such change or discontinuance, as the case may be, file notice in Form No. MGT.3 with the Registrar of such change or discontinuance.

(3) A foreign register shall be deemed to be part of the company’s register (hereafter in this rule referred to as the “principal register”) of members or of debenture holders or of any other security holders or beneficial owners, as the case may be.

(4) The foreign register shall be maintained in the same format as the principal register.

(5) A foreign register shall be open to inspection and may be closed, and extracts may be taken therefrom and copies thereof may be required, in the same manner, mutatis mutandis, as is applicable to the principal register, except that the advertisement before closing the register shall be inserted in at least two newspapers circulating in the place wherein the foreign register is kept.

(6) If a foreign register is kept by a company in any country outside India, the decision of the appropriate competent authority in regard to the rectification of the register shall be binding.

(7) Entries in the foreign register maintained under sub-section (4) of section 88 shall be made simultaneously after the Board of Directors or its duly constituted committee approves the allotment or transfer of shares, debentures or any other securities, as the case may be.

(8) The company shall—

(a)transmit to its registered office in India a copy of every entry in any foreign register within fifteen days after the entry is made; and
(b)keep at such office a duplicate register of every foreign register duly entered up from time to time.

(9) Every such duplicate register shall, for all the purposes of this Act, be deemed to be part of the principal register.

(10) Subject to the provisions of section 88 and the rules made thereunder, with respect to duplicate registers, the shares or as the case may be, debentures or any other security, registered in any foreign register shall be distinguished from the shares or as the case may be, debentures or any other security, registered in the principal register and in every other foreign register; and no transaction with respect to any shares or as the case may be, debentures or any other security, registered in a foreign register shall, during the continuance of that registration, be registered in any other register.

(11) The company may discontinue the keeping of any foreign register; and thereupon all entries in that register shall be transferred to some other foreign register kept by the company outside India or to the principal register.

Authentication.

8. (1) The entries in the registers maintained under section 88 and index included therein shall be authenticated by the company secretary of the company or by any other person authorised by the Board for the purpose, and the date of the board resolution authorising the same shall be mentioned.

(2) The entries in the foreign register shall be authenticated by the company secretary of the company or person authorised by the Board by appending his signature to each entry.

Declaration in respect of beneficial interest in any shares.

9. (1) A person whose name is entered in the register of members of a company as the holder of shares in that company but who does not hold the beneficial interest in such shares (hereinafter referred to as “the registered owner”), shall file with the company, a declaration to that effect in Form No. MGT.4 in duplicate, within a period of thirty days from the date on which his name is entered in the register of members of such company :

Provided that where any change occurs in the beneficial interest in such shares, the registered owner shall, within a period of thirty days from the date of such change, make a declaration of such change to the company inForm No. MGT.4 in duplicate.

(2) Every person holding and exempted from furnishing declaration or acquiring a beneficial interest in shares of a company not registered in his name (hereinafter referred to as “the beneficial owner”) shall file with the company, a declaration disclosing such interest in Form No. MGT.5 in duplicate, within thirty days after acquiring such beneficial interest in the shares of the company :

Provided that where any change occurs in the beneficial interest in such shares, the beneficial owner shall, within a period of thirty days from the date of such change, make a declaration of such change to the company inForm No. MGT.5 in duplicate.

(3) Where any declaration under section 89 is received by the company, the company shall make a note of such declaration in the register of members and shall file, within a period of thirty days from the date of receipt of declaration by it, a return in Form No. MGT.6 with the Registrar in respect of such declaration with fee.

Closure of register of members or debenture holders or other security holders.

10. (1) A company closing the register of members or the register of debenture holders or the register of other security holders shall give at least seven days previous notice and in such manner, as may be specified by Securities and Exchange Board of India, if such company is a listed company or intends to get its securities listed, by advertisement at least once in a vernacular newspaper in the principal vernacular language of the district and having a wide circulation in the place where the registered office of the company is situated, and at least once in English language in an English newspaper circulating in that district and having wide circulation in the place where the registered office of the company is situated and publish the notice on the website as may be notified by the Central Government and on the website, if any, of the Company.

(2) The provisions contained in sub-rule (1) shall not be applicable to a private company provided that the notice has been served on all members of the private company not less than seven days prior to closure of the register of members or debenture holders or other security holders.

Annual Return.

11. (1) Every company shall prepare its annual return in Form No. MGT.7.

(2) The annual return, filed by a listed company or a company having paid-up share capital of ten crore rupees or more or turnover of fifty crore rupees or more, shall be certified by a Company Secretary in practice and the certificate shall be in Form No. MGT.8.

Extract of annual return.

12. (1) The extract of the annual return to be attached with the Board’s Report shall be in Form No. MGT.9.

(2) A copy of the annual return shall be filed with the Registrar with such fee as may be specified for the purpose.

Return of changes in shareholding position of promoters and top ten shareholders.

13. Every listed company shall file with the Registrar, a return in Form No. MGT.10 along with the fee with respect to changes relating to either increase or decrease of two per cent, or more in the shareholding position of promoters and top ten shareholders of the company in each case, either value or volume of the shares, within fifteen days of such change.

Explanation.—For the purpose of this sub-rule, the “change” means increase or decrease by two per cent or more in the shareholding of each of the promoters and each of the top ten shareholders of the company.

Inspection of registers, returns etc.

14. (1) The registers and indices maintained pursuant to section 88 and copies of returns prepared pursuant to section 92, shall be open for inspection during business hours, at such reasonable time on every working day as the board may decide, by any member, debenture holder, other security holder or beneficial owner without payment of fee and by any other person on payment of such fee as may be specified in the articles of association of the company but not exceeding fifty rupees for each inspection.

Explanation.—For the purposes of this sub-rule, reasonable time of not less than two hours on every working day shall be considered by the company.

(2) Any such member, debenture holder, security holder or beneficial owner or any other person may require a copy of any such register or entries therein or return on payment of such fee as may be specified in the articles of association of the company but not exceeding ten rupees for each page. Such copy or entries or return shall be supplied within seven days of deposit of such fee.

Preservation of register of members etc. and annual return.

15. (1) The register of members along with the index shall be preserved permanently and shall be kept in the custody of the company secretary of the company or any other person authorized by the Board for such purpose; and

(2) The register of debenture holders or any other security holders along with the index shall be preserved for a period of eight years from the date of redemption of debentures or securities, as the case may be, and shall be kept in the custody of the company secretary of the company or any other person authorized by the Board for such purpose.

(3) Copies of all annual returns prepared under section 92 and copies of all certificates and documents required to be annexed thereto shall be preserved for a period of eight years from the date of filing with the Registrar.

(4) The foreign register of members shall be preserved permanently, unless it is discontinued and all the entries are transferred to any other foreign register or to the principal register. Foreign register of debenture holders or any other security holders shall be preserved for a period of eight years from the date of redemption of such debentures or securities.

(5) The foreign register shall be kept in the custody of the company secretary or person authorised by the Board.

(6) A copy of the proposed special resolution in advance to be filed with the registrar as required in accordance with first proviso of sub-section (1) of section 94, shall be filed with the Registrar, at least one day before the date of general meeting of the company in Form No. MGT.14.

Copies of the registers and annual return.

16. Copies of the registers maintained under section 88 or entries therein and annual return filed under section 92 shall be furnished to any member, debenture-holder, other security holder or beneficial owner of the company or any other person on payment of such fee as may be specified in the Articles of Association of the company but not exceeding rupees ten for each page and such copy shall be supplied by the company within a period of seven days from the date of deposit of fee to the company.

Calling of extraordinary general meeting by requisitionists.

17. (1) The members may requisition convening of an extraordinary general meeting in accordance with sub-section (4) of section 100, by providing such requisition in writing or through electronic mode at least clear twenty-one days prior to the proposed date of such extraordinary general meeting.

(2) The notice shall specify the place, date, day and hour of the meeting and shall contain the business to be transacted at the meeting.—

Explanation.—For the purposes of this sub-rule, it is hereby clarified that requisitionists should convene meeting at Registered office or in the same city or town where Registered office is situated and such meeting should be convened on working day.

(3) If the resolution is to be proposed as a special resolution, the notice shall be given as required by sub-section (2) of section 114.

(4) The notice shall be signed by all the requisitionists or by a requistionists duly authorised in writing by all other requisitionists on their behalf or by sending an electronic request attaching therewith a scanned copy of such duly signed requisition.

(5) No explanatory statement as required under section 102 need be annexed to the notice of an extraordinary general meeting convened by the requisitionists and the requisitionists may disclose the reasons for the resolution(s) which they propose to move at the meeting.

(6) The notice of the meeting shall be given to those members whose names appear in the Register of members of the company within three days on which the requisitionists deposit with the Company a valid requisition for calling an extraordinary general meeting.

(7) Where the meeting is not convened, the requisitionists shall have a right to receive list of members together with their registered address and number of shares held and the company concerned is bound to give a list of members together with their registered address made as on twenty first day from the date of receipt of valid requisition together with such changes, if any, before the expiry of the forty-five days from the date of receipt of a valid requisition.

(8) The notice of the meeting shall be given by speed post or registered post or through electronic mode. Any accidental omission to give notice to, or the non-receipt of such notice by, any member shall not invalidate the proceedings of the meeting.

Notice of the meeting.

18. (1) A company may give notice through electronic mode.

Explanation.—For the purpose of this rule, the expression “electronic mode” shall mean any communication sent by a company through its authorized and secured computer programme which is capable of producing confirmation and keeping record of such communication addressed to the person entitled to receive such communication at the last electronic mail address provided by the member.

(2) A notice may be sent through e-mail as a text or as an attachment to e-mail or as a notification providing electronic link or Uniform Resource Locator for accessing such notice.

(3) (i) The e-mail shall be addressed to the person entitled to receive such e-mail as per the records of the company or as provided by the depository :

Provided that the company shall provide an advance opportunity atleast once in a financial year, to the member to register his e-mail address and changes therein and such request may be made by only those members who have not got their email id recorded or to update a fresh e-mail id and not from the members whose e-mail ids are already registered.

(ii) The subject line in e-mail shall state the name of the company, notice of the type of meeting, place and the date on which the meeting is scheduled.

(iii) If notice is sent in the form of a non-editable attachment to e-mail, such attachment shall be in the Portable Document Format or in a non-editable format together with a ‘link or instructions’ for recipient for downloading relevant version of the software.

(iv) When notice or notifications of availability of notice are sent by e-mail, the company should ensure that it uses a system which produces confirmation of the total number of recipients e-mailed and a record of each recipient to whom the notice has been sent and copy of such record and any notices of any failed transmissions and subsequent re-sending shall be retained by or on behalf of the company as “proof of sending”.

(v) The company’s obligation shall be satisfied when it transmits the e-mail and the company shall not be held responsible for a failure in transmission beyond its control.

(vi) If a member entitled to receive notice fails to provide or update relevant e-mail address to the company, or to the depository participant as the case may be, the company shall not be in default for not delivering notice via e-mail.

(vii) The company may send e-mail through in-house facility or its registrar and transfer agent or authorise any third party agency providing bulk e-mail facility.

(viii) The notice made available on the electronic link or Uniform Resource Locator has to be readable, and the recipient should be able to obtain and retain copies and the company shall give the complete Uniform Resource Locator or address of the website and full details of how to access the document or information.

(ix) The notice of the general meeting of the company shall be simultaneously placed on the website of the company if any and on the website as may be notified by the Central Government.

Explanation.—For the purpose of this rule, it is hereby declared that the extraordinary general meeting shall be held at a place within India.

Proxies.

19. (1) A member of a company registered under section 8 shall not be entitled to appoint any other person as his proxy unless such other person is also a member of such company.

(2) A person can act as proxy on behalf of members not exceeding fifty and holding in the aggregate not more than ten per cent of the total share capital of the company carrying voting rights :

Provided that a member holding more than ten per cent, of the total share capital of the Company carrying voting rights may appoint a single person as proxy and such person shall not act as proxy for any other person or shareholder.

(3) The appointment of proxy shall be in the Form No. MGT.11.

Voting through electronic means.

20. (1) Every listed company or a company having not less than one thousand shareholders, shall provide to its members facility to exercise their right to vote at general meetings by electronic means.

(2) A member may exercise his right to vote at any general meeting by electronic means and company may pass any resolution by electronic voting system in accordance with the provisions of this rule.

Explanation.—For the purposes of this rule,—

(i)the expression “voting by electronic means” or “electronic voting system” means a ‘secured system’ based process of display of electronic ballot, recording of votes of the members and the number of votes polled in favour or against, such that the entire voting exercised by way of electronic means gets registered and counted in an electronic registry in a centralized server with adequate ‘cyber security’;
(ii)the expression “secured system” means computer hardware software, and procedure that—
(a)are reasonably secure from unauthorized access and misuse;
(b)provide a reasonable level of reliability and correct operation;
(c)are reasonably suited to performing the intended functions; and
(d)adhere to generally accepted security procedures.
(iii)the expression “Cyber security” means protecting information, equipment, devices, computer, computer resource, communication device and information stored therein from unauthorised access, use disclosures, disruption, modification or destruction.

(3) A company which opts to provide the facility to its members to exercise their votes at any general meeting by electronic voting system shall follow the following procedure, namely:—

(i)the notices of the meeting shall be sent to all the members, auditors of the company, or directors either—
(a)by registered post or speed post ; or
(b)through electronic means like registered e-mail id;
(c)through courier service;
(ii)the notice shall also be placed on the website of the company, if any, and of the agency forthwith after it is sent to the members;
(iii)the notice of the meeting shall clearly mention that the business may be transacted through electronic voting system and the company is providing facility for voting by electronic means;
(iv)the notice shall clearly indicate the process and manner for voting by electronic means and the time schedule including the time period during which the votes may be cast and shall also provide the login ID and create a facility for generating password and for keeping security and casting of vote in a secure manner;
(v)the company shall cause an advertisement to be published, not less than five days before the date of beginning of the voting period, at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated, and having a wide circulation in that district, and at least once in English language in an English newspaper having a wide circulation in that district, about having sent the notice of the meeting and specifying therein, inter alia,the following matters, namely:—
(a)statement that the business may be transacted by electronic voting;
(b)the date of completion of sending of notices;
(c)the date and time of commencement of voting through electronic means;
(d)the date and time of end of voting through electronic means;
(e)the statement that voting shall not be allowed beyond the said date and time;
(f)website address of the company and agency, if any, where notice of the meeting is displayed; and
(g)contact details of the person responsible to address the grievances connected with the electronic voting;
(vi)the e-voting shall remain open for not less than one day and not more than three days :
Provided that in all such cases, such voting period shall be completed three days prior to the date of the general meeting;
(vii)during the e-voting period, shareholders of the company, holding shares either in physical form or in dematerialized form, as on the record date, may cast their vote electronically :
Provided that once the vote on a resolution is cast by the shareholder he shall not be allowed to change it subsequently;
(viii)at the end of the voting period, the portal where votes are cast shall forthwith be blocked;
(ix)the Board of directors shall appoint one scrutinizer, who may be Chartered Accountant in practice, Cost Accountant in practice, or Company Secretary in practice or an advocate, but not in employment of the company and is a person of repute who, in the opinion of the Board can scrutinize the e-voting process in a fair and transparent manner:
Provided that the scrutinizer so appointed may take assistance of a person who is not in employment of the company and who is well-versed with the e-voting system;
(x)the scrutinizer shall be willing to be appointed and be available for the purpose of ascertaining the requisite majority;
(xi)the scrutinizer shall, within a period of not exceeding three working days from the date of conclusion of e-voting period, unblock the votes in the presence of at least two witnesses not in the employment of the company and make a scrutinizer’s report of the votes cast in favour or against, if any, forthwith to the Chairman;
(xii)the scrutinizer shall maintain a register either manually or electronically to record the assent or dissent, received, mentioning the particulars of name, address, folio number or client ID of the shareholders, number of shares held by them, nominal value of such shares and whether the shares have differential voting rights;
(xiii)the register and all other papers relating to electronic voting shall remain in the safe custody of the scrutinizer until the chairman considers, approves and signs the minutes and thereafter, the scrutinizer shall return the register and other related papers to the company;
(xiv)the results declared along with the scrutinizer’s report shall be placed on the website of the company and on the website of the agency within two days of passing of the resolution at the relevant general meeting of members;
(xv)subject to receipt of sufficient votes, the resolution shall be deemed to be passed on the date of the relevant general meeting of members.

Manner in which the Chairman of meeting shall get the poll process scrutinised and report thereon.

21. (1) The Chairman of a meeting shall ensure that—

(a)The Scrutinizers are provided with the Register of Members, specimen signatures of the members, Attendance Register and Register of Proxies.
(b)The Scrutinizers are provided with all the documents received by the Company pursuant to sections 105, 112 and section 113.
(c)The Scrutinizers shall arrange for Polling papers and distribute them to the members and proxies present at the meeting; in case of joint shareholders, the polling paper shall be given to the first named holder or in his absence to the joint holder attending the meeting as appearing in the chronological order in the folio and the Polling paper shall be in Form No. MGT.12.
(d)The Scrutinizers shall keep a record of the polling papers received in response to poll, by initialing it.
(e)The Scrutinizers shall lock and seal an empty polling box in the presence of the members and proxies.
(f)The Scrutinizers shall open the Polling box in the presence of two persons as witnesses after the voting process is over.
(g)In case of ambiguity about the validity of a proxy, the Scrutinizers shall decide the validity in consultation with the Chairman.
(h)The Scrutinizers shall ensure that if a member who has appointed a proxy has voted in person, the proxy’s vote shall be disregarded.
(i)The Scrutinizers shall count the votes cast on poll and prepare a report thereon addressed to the Chairman.
(j)Where voting is conducted by electronic means under the provisions of section 108 and rules made thereunder, the company shall provide all the necessary support, technical and otherwise, to the Scrutinizers in orderly conduct of the voting and counting the result thereof.
(k)The Scrutinizers’ report shall state total votes cast, valid votes, votes in favour and against the resolution including the details of invalid polling papers and votes comprised therein.
(l)The Scrutinizers shall submit the Report to the Chairman who shall counter-sign the same.
(m)The Chairman shall declare the result of Voting on poll. The result may either be announced by him or a person authorized by him in writing.

(2) The scrutinizers appointed for the poll, shall submit a report to the Chairman of the meeting in Form No. MGT.13 and the report shall be signed by the scrutinizer and, in case there is more than one scrutinizer by all the scrutinizer, and the same shall be submitted by them to the Chairman of the meeting within seven days from the date the poll is taken.

Procedure to be followed for conducting business through postal ballot.

22. (1) Where a company is required or decides to pass any resolution by way of postal ballot, it shall send a notice to all the shareholders, along with a draft resolution explaining the reasons therefor and requesting them to send their assent or dissent in writing on a postal ballot because postal ballot means voting by post or through electronic means within a period of thirty days from the date of dispatch of the notice.

(2) The notice shall be sent either (a) by Registered Post or speed post, or (b) through electronic means like registered e-mail id or (c) through courier service for facilitating the communication of the assent or dissent of the shareholder to the resolution within the said period of thirty days.

(3) An advertisement shall be published at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated, and having a wide circulation in that district, and at least once in English language in an English newspaper having a wide circulation in that district, about having dispatched the ballot papers and specifying therein, inter alia, the following matters, namely:—

(a)a statement to the effect that the business is to be transacted by postal ballot which includes voting by electronic means;
(b)the date of completion of dispatch of notices;
(c)the date of commencement of voting;
(d)the date of end of voting;
(e)the statement that any postal ballot received from the member beyond the said date will not be valid and voting whether by post or by electronic means shall not be allowed beyond the said date;
(f)a statement to the effect that members, who have not received postal ballot forms may apply to the company and obtain a duplicate thereof; and
(g)contact details of the person responsible to address the grievances connected with the voting by postal ballot including voting by electronic means.

(4) The notice of the postal ballot shall also be placed on the website of the company forthwith after the notice is sent to the members and such notice shall remain on such website till the last date for receipt of the postal ballots from the members.

(5) The Board of directors shall appoint one scrutinizer, who is not in employment of the company and who, in the opinion of the Board can conduct the postal ballot voting process in a fair and transparent manner.

(6) The scrutinizer shall be willing to be appointed and be available for the purpose of ascertaining the requisite majority.

(7) If a resolution is assented to by the requisite majority of the shareholders by means of postal ballot including voting by electronic means, it shall be deemed to have been duly passed at a general meeting convened in that behalf.

(8) Postal ballot received back from the shareholders shall be kept in the safe custody of the scrutinizer and after the receipt of assent or dissent of the shareholder in writing on a postal ballot, no person shall deface or destroy the ballot paper or declare the identity of the shareholder.

(9) The scrutinizer shall submit his report as soon as possible after the last date of receipt of postal ballots but not later than seven days thereof;

(10) The scrutinizer shall maintain a register either manually or electronically to record their assent or dissent received, mentioning the particulars of name, address, folio number or client ID of the shareholder, number of shares held by them, nominal value of such shares, whether the shares have differential voting rights, if any, details of postal ballots which are received in defaced or mutilated form and postal ballot forms which are invalid.

(11) The postal ballot and all other papers relating to postal ballot including voting by electronic means, shall be under the safe custody of the scrutinizer till the chairman considers, approves and signs the minutes and thereafter, the scrutinizer shall return the ballot papers and other related papers or register to the company who shall preserve such ballot papers and other related papers or register safely.

(12) The assent or dissent received after thirty days from the date of issue of notice shall be treated as if reply from the member has not been received.

(13) The results shall be declared by placing it, along with the scrutinizer’s report, on the website of the company.

(14) The resolution shall be deemed to be passed on the date of at a meeting convened in that behalf.

(15) The provisions of rule 20 regarding voting by electronic means shall apply, as far as applicable, mutatis mutandis to this rule in respect of the voting by electronic means.

(16) pursuant to clause (a) of sub-section (1) of section 110, the following items of business shall be transacted only by means of voting through a postal ballot—

(a)alteration of the objects clause of the memorandum and in the case of the company in existence immediately before the commencement of the Act, alteration of the main objects of the memorandum;
(b)alteration of articles of association in relation to insertion or removal of provisions which, under sub-section (68) of section 2, are required to be included in the articles of a company in order to constitute it a private company;
(c)change in place of registered office outside the local limits of any city, town or village as specified in sub-section (5) of section 12;
(d)change in objects for which a company has raised money from public through prospectus and still has any unutilized amount out of the money so raised under sub-section (8) of section 13;
(e)issue of shares with differential rights as to voting or dividend or otherwise under sub-clause (ii) ofclause (a) of section 43;
(f)variation in the rights attached to a class of shares or debentures or other securities as specified under section 48;
(g)buy-back of shares by a company under sub-section (1) of section 68;
(h)election of a director under section 151 of the Act;
(i)sale of the whole or substantially the whole of an undertaking of a company as specified under sub-clause (a) of sub-section (1) of section 180;
(j)giving loans or extending guarantee or providing security in excess of the limit specified under sub-section (3) of section 186:
Provided that One Person Company and other companies having members upto two hundred are not required to transact any business through postal ballot.

Special Notice.

23. (1) A special notice required to be given to the company shall be signed, either individually or collectively by such number of members holding not less than one per cent of total voting power or holding shares on which an aggregate sum of not less than five lakh rupees has been paid up on the date of the notice.

(2) The notice referred to in sub-rule (1) shall be sent by members to the company not earlier than three months but at least fourteen days before the date of the meeting at which the resolution is to be moved, exclusive of the day on which the notice is given and the day of the meeting.

(3) The company shall immediately after receipt of the notice, give its members notice of the resolution at least seven days before the meeting, exclusive of the day of dispatch of notice and day of the meeting, in the same manner as it gives notice of any general meetings.

Where it is not practicable to give the notice in the same manner as it gives notice of any general meetings, the notice shall be published in English language in English newspaper and in vernacular language in a vernacular newspaper, both having wide circulation in the State where the registered office of the Company is situated and such notice shall also be posted on the website, if any, of the Company.

(4) The notice shall be published at least seven days before the meeting, exclusive of the day of publication of the notice and day of the meeting.

Resolutions and agreements to be filed.

24. A copy of every resolution or any agreement required to be filed, together with the explanatory statement under section 102, if any, shall be filed with the Registrar in Form No. MGT.14 along with the fee.

Minutes of proceedings of general meeting, meeting of Board of Directors and other meetings and resolutions passed by postal ballot.

25. (1) (a) A distinct minute book shall be maintained for each type of meeting namely:—

(i)general meetings of the members;
(ii)meetings of the creditors
(iii)meetings of the Board; and
(iv)meetings of each of the committees of the Board.

Explanation.- For the proposes of this sub-rule, resolutions passed by postal ballot shall be recorded in the minute book of general meetings as if it has been deemed to be passed in the general meeting.

(b) (i) The minutes of proceedings of each meeting shall be entered in the books maintained for that purpose along with the date of such entry within thirty days of the conclusion of the meeting.

(ii) In case of every resolution passed by postal ballot, a brief report on the postal ballot conducted including the resolution proposed, the result of the voting thereon and the summary of the scrutinizer’s report shall be entered in the minutes book of general meetings along with the date of such entry within thirty days from the date of passing of resolution.

(d) Each page of every such book shall be initialled or signed and the last page of the record of proceedings of each meeting or each report in such books shall be dated and signed—

(i)in the case of minutes of proceedings of a meeting of the Board or of a committee thereof, by the chairman of the said meeting or the chairman of the next succeeding meeting;
(ii)in the case of minutes of proceedings of a general meeting, by the chairman of the same meeting within the aforesaid period of thirty days or in the event of the death or inability of that chairman within that period, by a director duly authorised by the Board for the purpose;
(iii)In case of every resolution passed by postal ballot, by the chairman of the Board within the aforesaid period of thirty days or in the event of there being no chairman of the Board or the death or inability of that chairman within that period, by a director duly authorized by the Board for the purpose.

(e) The minute books of general meetings, shall be kept at the registered office of the company and shall be preserved permanently and kept in the custody of the company secretary or any director duly authorised by the board or at such other place as may be approved by the Board.

(f) The minutes books of the Board and committee meetings shall be preserved permanently and kept in the custody of the company secretary of the company or any director duly authorized by the Board for the purpose and shall be kept in the registered office or such place as Board may decide.

Copy of minute book of general meeting.

26. Any member shall be entitled to be furnished, within seven working days after he has made a request in that behalf to the company, with a copy of any minutes of any general meeting, on payment of such sum as may be specified in the articles of association of the company, but not exceeding a sum of ten rupees for each page or part of any page:

Provided that a member who has made a request for provision of soft copy in respect of minutes of any previous general meetings held during a period immediately preceding three financial years shall be entitled to be furnished, with the same free of cost.

Maintenance and inspection of document in electronic form.

27. (1) Every listed company or a company having not less than one thousand shareholders, debenture holders and other security holders, shall maintain its records, as required to be maintained under the Act or rules made thereunder, in electronic form.

Explanation.—For the purposes of this sub-rule, it is hereby clarified that in case of existing companies, data shall be converted from physical mode to electronic mode within six months from the date of notification of provisions of section 120 of the Act.

(2) The records in electronic form shall be maintained in such manner as the Board of directors of the company may think fit:

Provided that—

(a)the records are maintained in the same formats and in accordance with all other requirements as provided in the Act or the rules made thereunder;
(b)the information as required under the provisions of the Act or the rules made there-under should be adequately recorded for future reference;
(c)the records must be capable of being readable, retrievable and reproducible in printed form;
(d)the records are capable of being dated and signed digitally wherever it is required under the provisions of the Act or the rules made thereunder;
(e)the records, once dated and signed digitally, shall not be capable of being edited or altered;
(f)the records shall be capable of being updated, according to the provisions of the Act or the rules made thereunder, and the date of updating shall be capable of being recorded on every updating.

Explanation.—For the purpose of this rule, the term “records” means any register, index, agreement,memorandum, minutes or any other document required by the Act or the rules made thereunder to be kept by a company.

Security of records maintained in electronic form.

28. (1) The Managing Director, Company Secretary or any other director or officer of the company as the Board may decide shall be responsible for the maintenance and security of electronic records.

(2) The person who is responsible for the maintenance and security of electronic records shall-

(a)provide adequate protection against unauthorized access, alteration or tampering of records;
(b)ensure against loss of the records as a result of damage to, or failure of the media on which the records are maintained;
(c)ensure that the signatory of electronic records does not repudiate the signed record as not genuine;
(d)ensure that computer systems, software and hardware are adequately secured and validated to ensure their accuracy, reliability and consistent intended performance;
(e)ensure that the computer systems can discern invalid and altered records;
(f)ensure that records are accurate, accessible, and capable of being reproduced for reference later;
(g)ensure that the records are at all times capable of being retrieved to a readable and printable form;
(h)ensure that records are kept in a non-rewriteable and non-erasable format like pdf. version or some other version which cannot be altered or tampered;
(i)ensure that at least one backup, taken at a periodicity of not exceeding one day, are kept of the updated records kept in electronic form, every backup is authenticated and dated and such backups shall be securely kept at such places as may be decided by the Board;
(j)limit the access to the records to the managing director, company secretary or any other director or officer or persons performing work of the company as may be authorized by the Board in this behalf;
(k)ensure that any reproduction of non-electronic original records in electronic form is complete, authentic, true and legible when retrieved;
(l)arrange and index the records in a way that permits easy location, access and retrieval of any particular record; and
(m)take necessary steps to ensure security, integrity and confidentiality of records.

Inspection and copies of records maintained in electronic form.

29. Where a company maintains its records in electronic form, any duty imposed by the Act or rules made thereunder to make those records available for inspection or to provide copies of the whole or a part of those records, shall be construed as a duty to make the records available for inspection in electronic form or to provide copies of those records containing a clear reproduction of the whole or part thereof, as the case may be on payment of not exceeding ten rupees per page.

Penalty

30. If any default is made in compliance with any of the provisions of this rule, the company and every officers or such other person who is in default shall be punishable with fine which may extend to five thousand rupees and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day after the first during which such contravention continues.

Report on Annual General Meeting.

31. (1) The report in pursuance of the provisions of sub-section (1) of section 121 shall be prepared in the following manner, namely:—

(a)the report under this section shall be prepared in addition to the minutes of the general meeting;
(b)the report shall be signed and dated by the Chairman of the meeting or in case of his inability to sign, by any two directors of the company, one of whom shall be the Managing director, if there is one and company secretary of the company;
(c)the report shall contain the details in respect of the following, namely:—
(i)the day, date, hour and venue of the annual general meeting;
(ii)confirmation with respect to appointment of Chairman of the meeting;
(iii)number of members attending the meeting;
(iv)confirmation of quorum;
(v)confirmation with respect to compliance of the Act and the Rules, secretarial standards made thereunder with respect to calling, convening and conducting the meeting;
(vi)business transacted at the meeting and result thereof;
(vii)particulars with respect to any adjournment, postponement of meeting, change in venue; and
(viii)any other points relevant for inclusion in the report.
(d)the Report shall contain fair and correct summary of the proceedings of the meeting.

(2) The copy of the report prepared in pursuance of sub-section (1) of section 121 and sub-rule (1), shall be filed with the Registrar in Form No. MGT.15 within thirty days of the conclusion of the annual general meeting along with the fee.—Notification F. No. 01/34/2013 CL-V, dated 27-3-2014.

CHAPTER VIII : DECLARATION AND PAYMENT OF DIVIDEND

COMPANIES (DECLARATION AND PAYMENT OF DIVIDEND) RULES, 2014

In exercise of the powers conferred under sub-section (1) of section 123 read with section 469 of the Companies Act, 2013 (18 of 2013) and in supersession of the Companies ( Central Government’s) General Rules and Forms, 1959 and other Rules prescribed under Companies Act, 1956 on matters covered under these rules, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called the Companies (Declaration and Payment of Dividend) Rules, 2014.

(2) They shall come into force on the date of their publication in the Official Gazette.

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013;
(b)“section” means section of the Act.

(2) Words and expressions used in these rules but not defined and defined in the Act or in the Companies (Specification of Definitions Details) Rules, 2014, shall have the same meanings respectively assigned to them in the Act or in the said Rules.

Declaration of dividend out of reserves.

3. In the event of inadequacy or absence of profits in any year, a company may declare dividend out of free reserves subject to the fulfilment of the following conditions, namely:-

(1) The rate of dividend declared shall not exceed the average of the rates at which dividend was declared by it in the three years immediately preceding that year:

Provided that this sub-rule shall not apply to a company, which has not declared any dividend in each of the three preceding financial year.

(2) The total amount to be drawn from such accumulated profits shall not exceed one-tenth of the sum of its paid-up share capital and free reserves as appearing in the latest audited financial statement.

(3) The amount so drawn shall first be utilised to set off the losses incurred in the financial year in which dividend is declared before any dividend in respect of equity shares is declared.

(4) The balance of reserves after such withdrawal shall not fall below fifteen per cent of its paid up share capital as appearing in the latest audited financial statement.

(5) No company shall declare dividend unless carried over previous losses and depreciation not provided in previous year are set off against profit of the company of the current year the loss or depreciation, whichever is less, in previous years is set off against the profit of the company for the year for which dividend is declared or paid.

CHAPTER IX : ACCOUNTS OF COMPANIES

COMPANIES (ACCOUNTS) RULES, 2014

In exercise of the powers conferred under sub-sections (1) and (3) of section 128, sub-section (3) of section 129, section 133, section 134, sub-section (4) of section 135, sub-section (1) of section 136, section 137 and section 138 read with section 469 of the Companies Act, 2013, and in supersession of the Companies (Central Government’s) General Rules and Forms, 1956 or any other rules prescribed under the Companies Act, 1956 (1 of 1956) on matters covered under these rules, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called the Companies (Accounts) Rules, 2014.

(2) They shall come into force on the date of their publication in the Official Gazette.

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Annexure” means the Annexure to these rules;
(c)“Fees” means the fees as specified in the Companies (Registration Offices and Fees) Rules, 2014;
(d)“Form” or “e-Form” means a form set forth in Annexure to these rules which shall be used for the matter to which it relates;
(e)“Schedule” means the Schedule to the Act;
(f)“section” means the section of the Act.

(2) The words and expressions used in these rules but not defined and defined in the Act or in the Companies (Specification of Definitions Details) Rules, 2014, shall have the meanings respectively assigned to them in the Act or in the said Rules.

Manner of books of account to be kept in electronic mode.

3. (1) The books of account and other relevant books and papers maintained in electronic mode shall remain accessible in India so as to be usable for subsequent reference.

(2) The books of account and other relevant books and papers referred to in sub-rule (1) shall be retained completely in the format in which they were originally generated, sent or received, or in a format which shall present accurately the information generated, sent or received and the information contained in the electronic records shall remain complete and unaltered.

(3) The information received from branch offices shall not be altered and shall be kept in a manner where it shall depict what was originally received from the branches.

(4) The information in the electronic record of the document shall be capable of being displayed in a legible form.

(5) There shall be a proper system for storage, retrieval, display or printout of the electronic records as the Audit Committee, if any, or the Board may deem appropriate and such records shall not be disposed of or rendered unusable, unless permitted by law:

Provided that the back-up of the books of account and other books and papers of the company maintained in electronic mode, including at a place outside India, if any, shall be kept in servers physically located in India on a periodic basis.

(6) The company shall intimate to the Registrar on an annual basis at the time of filing of financial statement—

(a)the name of the service provider;
(b)the internet protocol address of service provider;
(c)the location of the service provider (wherever applicable);
(d)where the books of account and other books and papers are maintained on cloud, such address as provided by the service provider.

Explanation.—For the purposes of this rule, the expression “electronic mode” includes “electronic form” as defined in clause (r) of sub-section (1) of section 2 of Information Technology Act, 2000 (21 of 2000) and also includes an electronic record as defined in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000) and “books of account” shall have the meaning assigned to it under the Act.

Conditions regarding maintenance and inspection of certain financial information by directors.

4. (1) The summarised returns of the books of account of the company kept and maintained outside India shall be sent to the registered office at quarterly intervals, which shall be kept and maintained at the registered office of the company and kept open to directors for inspection.

(2) Where any other financial information maintained outside the country is required by a director, the director shall furnish a request to the company setting out the full details of the financial information sought, the period for which such information is sought.

(3) The company shall produce such financial information to the director within fifteen days of the date of receipt of the written request.

(4) The financial information required under sub-rules (2) and (3) shall be sought for by the director himself and not by or through his power of attorney holder or agent or representative.

Form of Statement containing salient features of financial statements of subsidiaries.

5. The statement containing the salient feature of the financial statement of a company’s subsidiary or subsidiaries, associate company or companies and joint venture or ventures under the first proviso to sub-section (3) of section 129 shall be in Form AOC-1.

Manner of consolidation of accounts.

6. The consolidation of financial statements of the company shall be made in accordance with the provisions of Schedule III of the Act and the applicable accounting standards:

Provided that in case of a company covered under sub-section (3) of section 129 which is not required to prepare consolidated financial statements under the Accounting Standards, it shall be sufficient if the company complies with provisions on consolidated financial statements provided in Schedule III of the Act.

7. Transitional provisions with respect to Accounting Standards.

(1) The standards of accounting as specified under the Companies Act, 1956 (1 of 1956) shall be deemed to be the accounting standards until accounting standards are specified by the Central Government under section 133.

(2) Till the National Financial Reporting Authority is constituted under section 132 of the Act, the Central Government may prescribe the standards of accounting or any addendum thereto, as recommended by the Institute of Chartered Accountants of India in consultation with and after examination of the recommendations made by the National Advisory Committee on Accounting Standards constituted under section 210A of the Companies Act, 1956 (1 of 1956).

Matters to be included in Board’s report.

8. (1) The Board’s Report shall be prepared based on the stand alone financial statements of the company and the report shall contain a separate section wherein a report on the performance and financial position of each of the subsidiaries, associates and joint venture companies included in the consolidated financial statement is presented.

(2) The Report of the Board shall contain the particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188 in the Form AOC-2.

(3) The report of the Board shall contain the following information and details, namely:—

(A) Conservation of energy—

(i)the steps taken or impact on conservation of energy;
(ii)the steps taken by the company for utilising alternate sources of energy;
(iii)the capital investment on energy conservation equipments;

(B) Technology absorption—

(i)the efforts made towards technology absorption;
(ii)the benefits derived like product improvement, cost reduction, product development or import substitution;
(iii)in case of imported technology (imported during the last three years reckoned from the beginning of the financial year)—
(a)the details of technology imported;
(b)the year of import;
(c)whether the technology been fully absorbed;
(d)if not fully absorbed, areas where absorption has not taken place, and the reasons thereof; and
(iv)the expenditure incurred on Research and Development.

(C) Foreign exchange earnings and Outgo—

The Foreign Exchange earned in terms of actual inflows during the year and the Foreign Exchange outgo during the year in terms of actual outflows.

(4) Every listed company and every other public company having a paid up share capital of twenty five crore rupees or more calculated at the end of the preceding financial year shall include, in the report by its Board of directors, a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and individual directors.

(5) In addition to the information and details specified in sub-rule (4), the report of the Board shall also contain—

(i)the financial summary or highlights;
(ii)the change in the nature of business, if any;
(iii)the details of directors or key managerial personnel who were appointed or have resigned during the year;
(iv)the names of companies which have become or ceased to be its Subsidiaries, joint ventures or associate companies during the year;
(v)the details relating to deposits, covered under Chapter V of the Act,—
(a)accepted during the year;
(b)remained unpaid or unclaimed as at the end of the year;
(c)whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved—
(i)at the beginning of the year;
(ii)maximum during the year;
(iii)at the end of the year;
(vi)the details of deposits which are not in compliance with the requirements of Chapter V of the Act;
(vii)the details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operations in future;
(viii)the details in respect of adequacy of internal financial controls with reference to the Financial Statements.

Disclosures about CSR Policy.

9. The disclosure of contents of Corporate Social Responsibility Policy in the Board’s report and on the company’s website, if any, shall be as per annexure attached to the Companies (Corporate Social Responsibility Policy) Rules, 2014.

Statement containing salient features of financial statements.

10. The statement containing features of documents referred to in first proviso to sub-section (1) of section 136 shall be in Form AOC-3.

Manner of circulation of financial statements in certain cases.

11. In case of all listed companies and such public companies which have a net worth of more than one crore rupees and turnover of more than ten crore rupees, the financial statements may be sent—

(a)by electronic mode to such members whose shareholding is in dematerialised format and whose email Ids are registered with Depository for communication purposes;
(b)where shareholding is held otherwise than by dematerialised format, to such members who have positively consented in writing for receiving by electronic mode; and
(c)by despatch of physical copies through any recognised mode of delivery as specified under section 20 of the Act, in all other cases.

Filing of financial statements and fees to be paid thereon.

12. (1) Every company shall file the financial statements with Registrar together with Form AOC-4.

(2) The class of companies as may be notified by the Central Government from time to time, shall mandatorily file their financial statement in Extensible Business Reporting Language (XBRL) format and the Central Government may specify the manner of such filing under such notification for such class of companies.

Explanation.—For the purposes of this sub-rule, the term “Extensible Business Reporting Language” means a standardised language for communication in electronic form to express, report or file financial information by companies under this rule.

(3) The fees or additional fees referred to in sub-section (1) of section 137 and in the second proviso to the said sub-section and in sub-section (2) of the said section shall be as specified in the Companies (Registration Offices and Fees) Rules, 2014.

Companies required to appoint internal auditor.

13. (1) The following class of companies shall be required to appoint an internal auditor or a firm of internal auditors, namely:—

(a)every listed company;
(b)every unlisted public company having—
(i)paid up share capital of fifty crore rupees or more during the preceding financial year; or
(ii)turnover of two hundred crore rupees or more during the preceding financial year; or
(iii)outstanding loans or borrowings from banks or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year; or
(iv)outstanding deposits of twenty five crore rupees or more at any point of time during the preceding financial year; and
(c)every private company having—
(i)turnover of two hundred crore rupees or more during the preceding financial year; or
(ii)outstanding loans or borrowings from banks or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year:

Provided that an existing company covered under any of the above criteria shall comply with the requirements of section 138 and this rule within six months of commencement of such section.

Explanation.—For the purposes of this rule—

(i)the internal auditor may or may not be an employee of the company;
(ii)the term “Chartered Accountant” shall mean a Chartered Accountant whether engaged in practice or not.

(2) The Audit Committee of the company or the Board shall, in consultation with the Internal Auditor, formulate the scope, functioning, periodicity and methodology for conducting the internal audit.

CHAPTER X : AUDIT AND AUDITORS

COMPANIES (AUDIT AND AUDITORS) RULES, 2014

In exercise of powers conferred by sub-sections (1), (2) and (4) of section 139, sub-sections (1) and (2) of section 140, sub-section (3) of section 141, sub-sections (2), (3), (8) and (12) of section 143, sub-section (3) of section 148 read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013) and in supersession of the Companies (Central Government’s) General Rules and Forms, 1956 in so far as they relate to matters covered under these rules, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called as the Companies (Audit and Auditors) Rules, 2014.

(2) They shall come into force on the 1st day of April, 2014.

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Annexure” means the Annexure enclosed to these rules;
(c)“fees” means fees specified in the Companies (Registration Offices and Fees) Rules, 2014.
(d)“Form” or “e-Form” means a form set forth under these rules which shall be used for the matter to which it relates;
(e)“section” means section of the Act.

(2) The words and expressions used in these rules but not defined and defined in the Act or in the Companies (Specification of Definitions Details) Rules, 2014 shall have the meanings respectively assigned to them in the Act or in the said rules.

Manner and procedure of selection and appointment of auditors.

3. (1) In case of a company that is required to constitute an Audit Committee under section 177, the committee, and, in cases where such a committee is not required to be constituted, the Board, shall take into consideration the qualifications and experience of the individual or the firm proposed to be considered for appointment as auditor and whether such qualifications and experience are commensurate with the size and requirements of the company:

Provided that while considering the appointment, the Audit Committee or the Board, as the case may be, shall have regard to any order or pending proceeding relating to professional matters of conduct against the proposed auditor before the Institute of Chartered Accountants of India or any competent authority or any Court.

(2) The Audit Committee or the Board, as the case may be, may call for such other information from the proposed auditor as it may deem fit.

(3) Subject to the provisions of sub-rule (1), where a company is required to constitute the Audit Committee, the committee shall recommend the name of an individual or a firm as auditor to the Board for consideration and in other cases, the Board shall consider and recommend an individual or a firm as auditor to the members in the annual general meeting for appointment.

(4) If the Board agrees with the recommendation of the Audit Committee, it shall further recommend the appointment of an individual or a firm as auditor to the members in the annual general meeting.

(5) If the Board disagrees with the recommendation of the Audit Committee, it shall refer back the recommendation to the committee for reconsideration citing reasons for such disagreement.

(6) If the Audit Committee, after considering the reasons given by the Board, decides not to reconsider its original recommendation, the Board shall record reasons for its disagreement with the committee and send its own recommendation for consideration of the members in the annual general meeting; and if the Board agrees with the recommendations of the Audit Committee, it shall place the matter for consideration by members in the annual general meeting.

(7) The auditor appointed in the annual general meeting shall hold office from the conclusion of that meeting till the conclusion of the sixth annual general meeting, with the meeting wherein such appointment has been made being counted as the first meeting:

Provided that such appointment shall be subject to ratification in every annual general meeting till the sixth such meeting by way of passing of an ordinary resolution.

Explanation.—For the purposes of this rule, it is hereby clarified that, if the appointment is not ratified by the members of the company, the Board of Directors shall appoint another individual or firm as its auditor or auditors after following the procedure laid down in this behalf under the Act.

Conditions for appointment and notice to Registrar.

4. (1) The auditor appointed under rule 3 shall submit a certificate that—

(a)the individual or the firm, as the case may be, is eligible for appointment and is not disqualified for appointment under the Act, the Chartered Accountants Act, 1949 and the rules or regulations made thereunder;
(b)the proposed appointment is as per the term provided under the Act;
(c)the proposed appointment is within the limits laid down by or under the authority of the Act;
(d)the list of proceedings against the auditor or audit firm or any partner of the audit firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct.

(2) The notice to Registrar about appointment of auditor under fourth proviso to sub-section (1) of section 139 shall be in Form ADT-1.

Class of Companies.

5. For the purposes of sub-section (2) of section 139, the class of companies shall mean the following classes of companies excluding one person companies and small companies:—

(a)all unlisted public companies having paid up share capital of rupees ten crore or more;
(b)all private limited companies having paid up share capital of rupees twenty crore or more;
(c)all companies having paid up share capital of below threshold limit mentioned in (a) and (b) above, but having public borrowings from financial institutions, banks or public deposits of rupees fifty crores or more.

Manner of rotation of auditors by the companies on expiry of their term.

6. (1) The Audit Committee shall recommend to the Board, the name of an individual auditor or of an audit firm who may replace the incumbent auditor on expiry of the term of such incumbent.

(2) Where a company is required to constitute an Audit Committee, the Board shall consider the recommendation of such committee, and in other cases, the Board shall itself consider the matter of rotation of auditors and make its recommendation for appointment of the next auditor by the members in annual general meeting.

(3) For the purpose of the rotation of auditors—

(i)in case of an auditor (whether an individual or audit firm), the period for which the individual or the firm has held office as auditor prior to the commencement of the Act shall be taken into account for calculating the period of five consecutive years or ten consecutive years, as the case may be;
(ii)the incoming auditor or audit firm shall not be eligible if such auditor or audit firm is associated with the outgoing auditor or audit firm under the same network of audit firms.

Explanation I.—For the purposes of these rules the term “same network” includes the firms operating or functioning, hitherto or in future, under the same brand name, trade name or common control.

Explanation II.—For the purpose of rotation of auditors,—

(a)a break in the term for a continuous period of five years shall be considered as fulfilling the requirement of rotation;
(b)if a partner, who is in charge of an audit firm and also certifies the financial statements of the company, retires from the said firm and joins another firm of chartered accountants, such other firm shall also be ineligible to be appointed for a period of five years.

Illustration explaining rotation in case of individual auditor

Illustration 1 :

Number of consecutive years for which an individual auditor has been functioning as auditor in the same company [in the first AGM held after the commencement of provisions of section 139(2)]Maximum number of consecutive years for which he may be appointed in the same company (including transitional period)Aggregate period which the auditor would complete in the same company in view of column I and II
IIIIII
5 years (or more than 5 years)3 years8 years or more
4 years3 years7 years
3 years3 years6 years
2 years3 years5 years
1 year4 years5 years

Note: 1. Individual auditor shall include other individuals or firms whose name or trade mark or brand is used by such individual, if any.

2. Consecutive years shall mean all the preceding financial years for which the individual auditor has been the auditor until there has been a break by five years or more.

Illustration explaining rotation in case of audit firm

Illustration 2:—

Number of consecutive years for which an audit firm has been functioning as auditor in the same company [in the first AGM held after the commencement of provisions of section 139(2)]Maximum number of consecutive years for which the firm may be appointed in the same company (including transitional period)Aggregate period which the firm would complete in the same company in view of column I and II
IIIIII
10 years (or more than 10 years)3 years13 years or more
9 years3 years12 years
8 years3 years11 years
7 years3 years10 years
6 years4 years10 years
5 years5 years10 years
4 years6 years10 years
3 years7 years10 years
2 years8 years10 years
1 year9 years10 years

Note: 1. Audit Firm shall include other firms whose name or trade mark or brand is used by the firm or any of its partners.

2. Consecutive years shall mean all the preceding financial years for which the firm has been the auditor until there has been a break by five years or more.

(4) Where a company has appointed two or more individuals or firms or a combination thereof as joint auditors, the company may follow the rotation of auditors in such a manner that both or all of the joint auditors, as the case may be, do not complete their term in the same year.

Removal of the auditor before expiry of his term.

7. (1) The application to the Central Government for removal of auditor shall be made in Form ADT-2 and shall be accompanied with fees as provided for this purpose under the Companies (Registration Offices and Fees) Rules, 2014.

(2) The application shall be made to the Central Government within thirty days of the resolution passed by the Board.

(3) The company shall hold the general meeting within sixty days of receipt of approval of the Central Government for passing the special resolution.

Resignation of auditor.

8. For the purposes of sub-section (2) of section 140, when an auditor has resigned from the company, he shall file a statement in Form ADT-3.

Liability to devolve on concerned partners only.

9. In case of criminal liability of any audit firm, the liability other than fine, shall devolve only on the concerned partner or partners, who acted in a fraudulent manner or abetted or, as the case may be, colluded in any fraud.

Disqualifications of auditor.

10. (1) For the purpose of proviso to sub-clause (i) of clause (d) of sub-section (3) of section 141, a relative of an auditor may hold securities in the company of face value not exceeding rupees one lakh:

Provided that the condition under this sub-rule shall, wherever relevant, be also applicable in the case of a company not having share capital or other securities:

Provided further that in the event of acquiring any security or interest by a relative, above the threshold prescribed, the corrective action to maintain the limits as specified above shall be taken by the auditor within sixty days of such acquisition or interest.

(2) For the purpose of sub-clause (ii) of clause (d) of sub-section (3) of section 141, a person who or whose relative or partner is indebted to the company or its subsidiary or its holding or associate company or a subsidiary of such holding company, in excess of rupees five lakh shall not be eligible for appointment.

(3) For the purpose of sub-clause (iii) of clause (d) of sub-section (3) of section 141, a person who or whose relative or partner has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, or its subsidiary, or its holding or associate company or a subsidiary of such holding company, in excess of one lakh rupees shall not be eligible for appointment.

(4) For the purpose of clause (e) of sub-section (3) of section 141, the term “business relationship” shall be construed as any transaction entered into for a commercial purpose, except—

(i)commercial transactions which are in the nature of professional services permitted to be rendered by an auditor or audit firm under the Act and the Chartered Accountants Act, 1949 and the rules or the regulations made under those Acts;
(ii)commercial transactions which are in the ordinary course of business of the company at arm’s length price – like sale of products or services to the auditor, as customer, in the ordinary course of business, by companies engaged in the business of telecommunications, airlines, hospitals, hotels and such other similar businesses.

Other matters to be included in auditors report.

11. The auditor’s report shall also include their views and comments on the following matters, namely:—

(a)whether the company has disclosed the impact, if any, of pending litigations on its financial position in its financial statement;
(b)whether the company has made provision, as required under any law or accounting standards, for material foreseeable losses, if any, on long term contracts including derivative contracts;
(c)whether there has been any delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the company.

Duties and powers of the company’s auditor with reference to the audit of the branch and the branch auditor.

12. (1) For the purposes of sub-section (8) of section 143, the duties and powers of the company’s auditor with reference to the audit of the branch and the branch auditor, if any, shall be as contained in sub-sections (1) to (4) of section 143.

(2) The branch auditor shall submit his report to the company’s auditor.

(3) The provisions of sub-section (12) of section 143 read with rule 12 hereunder regarding reporting of fraud by the auditor shall also extend to such branch auditor to the extent it relates to the concerned branch.

Reporting of frauds by auditor.

13. (1) For the purpose of sub-section (12) of section 143, in case the auditor has sufficient reason to believe that an offence involving fraud, is being or has been committed against the company by officers or employees of the company, he shall report the matter to the Central Government immediately but not later than sixty days of his knowledge and after following the procedure indicated herein below:

(i)auditor shall forward his report to the Board or the Audit Committee, as the case may be, immediately after he comes to knowledge of the fraud, seeking their reply or observations within forty-five days;
(ii)on receipt of such reply or observations the auditor shall forward his report and the reply or observations of the Board or the Audit Committee alongwith his comments (on such reply or observations of the Board or the Audit Committee) to the Central Government within fifteen days of receipt of such reply or observations;
(iii)in case the auditor fails to get any reply or observations from the Board or the Audit Committee within the stipulated period of forty-five days, he shall forward his report to the Central Government alongwith a note containing the details of his report that was earlier forwarded to the Board or the Audit Committee for which he failed to receive any reply or observations within the stipulated time.

(2) The report shall be sent to the Secretary, Ministry of Corporate Affairs in a sealed cover by Registered Post with Acknowledgement Due or by Speed post followed by an e-mail in confirmation of the same.

(3) The report shall be on the letter-head of the auditor containing postal address, e-mail address and contact number and be signed by the auditor with his seal and shall indicate his Membership Number.

(4) The report shall be in the form of a statement as specified in Form ADT-4.

(5) The provision of this rule shall also apply, mutatis mutandis, to a cost auditor and a secretarial auditor during the performance of his duties under section 148 and section 204 respectively.

Remuneration of the Cost Auditor.

14. For the purpose of sub-section (3) of section 148,—

(a)in the case of companies which are required to constitute an audit committee—
(i)the Board shall appoint an individual, who is a cost accountant in practice, or a firm of cost accountants in practice, as cost auditor on the recommendations of the Audit committee, which shall also recommend remuneration for such cost auditor;
(ii)the remuneration recommended by the Audit Committee under (i) shall be considered and approved by the Board of Directors and ratified subsequently by the shareholders;
(b)in the case of other companies which are not required to constitute an audit committee, the Board shall appoint an individual who is a cost accountant in practice or a firm of cost accountants in practice as cost auditor and the remuneration of such cost auditor shall be ratified by shareholders subsequently.

COMPANIES (CORPORATE SOCIAL RESPONSIBILITY POLICY) RULES, 2014

In exercise of the powers conferred under section 135 and sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules, namely :—

Short title and commencement.

1. (1) These rules may be called the Companies (Corporate Social Responsibility Policy) Rules, 2014.

(2) They shall come into force on the 1st day of April, 2014.

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013;
(b)“Annexure” means the Annexure appended to these rules;
(c)“Corporate Social Responsibility (CSR)” means and includes but is not limited to :—
(i)Projects or programs relating to activities specified in Schedule VII to the Act; or
(ii)Projects or programs relating to activities undertaken by the board of directors of a company (Board) in pursuance of recommendations of the CSR Committee of the Board as per declared CSR Policy of the company subject to the condition that such policy will cover subjects enumerated in Schedule VII of the Act.
(d)“CSR Committee” means the Corporate Social Responsibility Committee of the Board referred to in section 135 of the Act.
(e)“CSR Policy” relates to the activities to be undertaken by the company as specified in Schedule VII to the Act and the expenditure thereon, excluding activities undertaken in pursuance of normal course of business of a company;
(f)“Net profit” means the net profit of a company as per its financial statement prepared in accordance with the applicable provisions of the Act, but shall not include the following, namely :—
(i)any profit arising from any overseas branch or branches of the company, whether operated as a separate company or otherwise; and
(ii)any dividend received from other companies in India, which are covered under and complying with the provisions of section 135 of the Act:

Provided that net profit in respect of a financial year for which the relevant financial statements were prepared in accordance with the provisions of the Companies Act, 1956 (1 of 1956) shall not be required to be re-calculated in accordance with the provisions of the Act:

Provided further that in case of a foreign company covered under these rules, net profit means the net profit of such company as per profit and loss account prepared in terms of clause (a) of sub-section (1) of section 381 read with section 198 of the Act.

(2) Words and expressions used and not defined in these rules but defined in the Act shall have the same meanings respectively assigned to them in the Act.

Corporate Social Responsibility.

3. (1) Every company including its holding or subsidiary, and a foreign company defined under clause (42) of section 2 of the Act having its branch office or project office in India, which fulfils the criteria specified in sub-section (1) of section 135 of the Act shall comply with the provisions of section 135 of the Act and these rules:

Provided that net worth, turnover or net profit of a foreign company of the Act shall be computed in accordance with balance sheet and profit and loss account of such company prepared in accordance with the provisions ofclause (a) of sub-section (1) of section 381 and section 198 of the Act.

(2) Every company which ceases to be a company covered under sub-section (1) of section 135 of the Act for three consecutive financial years shall not be required to—

(a)constitute a CSR Committee; and
(b)comply with the provisions contained in sub-sections (2) to (5) of the said section,

till such time it meets the criteria specified in sub-section (1) of section 135.

CSR Activities.

4. (1) The CSR activities shall be undertaken by the company, as per its stated CSR Policy, as projects or programs or activities (either new or ongoing), excluding activities undertaken in pursuance of its normal course of business.

(2) The Board of a company may decide to undertake its CSR activities approved by the CSR Committee, through a registered trust or a registered society or a company established by the company or its holding or subsidiary or associate company under section 8 of the Act or otherwise:

Provided that—

(i)if such trust, society or company is not established by the company or its holding or subsidiary or associate company, it shall have an established track record of three years in undertaking similar programs or projects;
(ii)the company has specified the project or programs to be undertaken through these entities, the modalities of utilization of funds on such projects and programs and the monitoring and reporting mechanism.

(3) A company may also collaborate with other companies for undertaking projects or programs or CSR activities in such a manner that the CSR Committees of respective companies are in a position to report separately on such projects or programs in accordance with these rules.

(4) Subject to provisions of sub-section (5) of section 135 of the Act, the CSR projects or programs or activities undertaken in India only shall amount to CSR Expenditure.

(5) The CSR projects or programs or activities that benefit only the employees of the company and their families shall not be considered as CSR activities in accordance with section 135 of the Act.

(6) Companies may build CSR capacities of their own personnel as well as those of their Implementing agencies through Institutions with established track records of at least three financial years but such expenditure shall not exceed five per cent of total CSR expenditure of the company in one financial year.

(7) Contribution of any amount directly or indirectly to any political party under section 182 of the Act, shall not be considered as CSR activity.

CSR Committees.

5. (1) The companies mentioned in the rule 3 shall constitute CSR Committee as under:—

(i)an unlisted public company or a private company covered under sub-section (1) of section 135 which is not required to appoint an independent director pursuant to sub-section (4) of section 149 of the Act, shall have its CSR Committee without such director ;
(ii)a private company having only two directors on its Board shall constitute its CSR Committee with two such directors;
(iii)with respect to a foreign company covered under these rules, the CSR Committee shall comprise of at least two persons of which one person shall be as specified under clause (d) of sub-section (1) of section 380 of the Act and another person shall be nominated by the foreign company.

(2) The CSR Committee shall institute a transparent monitoring mechanism for implementation of the CSR projects or programs or activities undertaken by the company.

CSR Policy.

6. (1) The CSR Policy of the company shall, inter alia, include the following namely :—

(a)a list of CSR projects or programs which a company plans to undertake falling within the purview of the Schedule VII of the Act, specifying modalities of execution of such project or programs and implementation schedules for the same; and
(b)monitoring process of such projects or programs:

Provided that the CSR activities does not include the activities undertaken in pursuance of normal course of business of a company :

Provided further that the Board of Directors shall ensure that activities included by a company in its Corporate Social Responsibility Policy are related to the activities included in Schedule VII of the Act.

(2) The CSR Policy of the company shall specify that the surplus arising out of the CSR projects or programs or activities shall not form part of the business profit of a company.

CSR Expenditure.

7. CSR expenditure shall include all expenditure including contribution to corpus, or on projects or programs relating to CSR activities approved by the Board on the recommendation of its CSR Committee, but does not include any expenditure on an item not in conformity or not in line with activities which fall within the purview of Schedule VII of the Act.

CSR Reporting.

8. (1) The Board’s Report of a company covered under these rules pertaining to a financial year commencing on or after the 1st day of April, 2014 shall include an annual report on CSR containing particulars specified in Annexure.

(2) In case of a foreign company, the balance sheet filed under sub-clause (b) of sub-section (1) of section 381 shall contain an Annexure regarding report on CSR.

Display of CSR activities on its website.

9. The Board of Directors of the company shall, after taking into account the recommendations of CSR Committee, approve the CSR Policy for the company and disclose contents of such policy in its report and the same shall be displayed on the company’s website, if any, as per the particulars specified in the Annexure.

ANNEXURE

FORMAT FOR THE ANNUAL REPORT ON CSR ACTIVITIES TO BE INCLUDED IN THE BOARD’S REPORT

1.A brief outline of the company’s CSR policy, including overview of projects or programs proposed to be undertaken and a reference to the web-link to the CSR policy and projects or programs.
2.The Composition of the CSR Committee.
3.Average net profit of the company for last three financial years.
4.Prescribed CSR Expenditure (two per cent of the amount as in item 3 above).
5.Details of CSR spent during the financial year:
(a)Total amount to be spent for the financial year;
(b)Amount unspent, if any;
(c)Manner in which the amount spent during the financial year is detailed below:
(1)(2)(3)(4)(5)(6)(7)(8)
S. No.CSR project or activity identifiedSector in which the project is coveredProjects or programs (1) Local area or other (2) Specify the State and district where projects or Programs was under- takenAmount outlay (budget) project or programs- wiseAmount spent on the projects or programs Sub- heads: (1) Direct expenditure on projects or programs (2) Over- heads :Cumulative- expenditure up to to the reporting periodAmount spent Direct or through implementing agency*
1.
2.
3.
TOTAL

*Give details of implementing agency:

6.In case the company has failed to spend the two per cent of the average net profit of the last three financial years or any part thereof, the company shall provide the reasons for not spending the amount in its Board report.
7.A responsibility statement of the CSR Committee that the implementation and monitoring of CSR Policy, is in compliance with CSR objectives and Policy of the company.
Sd/-

(Chief Executive Officer or Managing Director or Director)

Sd/-

(Chairman CSR Committee)

Sd/-

(Person specified under clause (d) of sub-section (1) of section 380 of the Act)

(wherever applicable)

CHAPTER XI : APPOINTMENT AND QUALIFICATIONS OF DIRECTORS

COMPANIES (APPOINTMENT AND QUALIFICATION OF DIRECTORS) RULES, 2014

In exercise of the powers conferred under second proviso to sub-section (1), sub-section (4), clause (f) of sub-section (6) of section 149, sub-sections (3) and (4) of section 150, section 151, sub-section (5) of section 152, section 153, section 154, section 157, section 160, sub-section (1) of section 168 and section 170 read with section 469 of the Companies Act, 2013, and in supersession of the Companies (Central Government’s) General Rules and Forms, 1956 or any other rules prescribed under the Companies Act, 1956 (1 of 1956) on matters covered under these rules, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called the Companies (Appointment and Qualification of Directors) Rules, 2014.

(2) They shall come into force on the date of their publication in the Official Gazette.

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Annexure” means the Annexure to these rules;
(c)“digital signature” means the digital signature as defined under clause (p) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);
(d)“Director Identification Number” (DIN) means an identification number allotted by the Central Government to any individual, intending to be appointed as director or to any existing director of a company, for the purpose of his identification as a director of a company :
Provided that the Director Identification Number (DIN) obtained by the individuals prior to the notification of these rules shall be the DIN for the purpose of the Companies Act, 2013 :
Provided further that “Director Identification Number” (DIN) includes the Designated Partnership Identification Number (DPIN) issued under section 7 of the Limited Liability Partnership Act, 2008 (6 of 2009) and rules made thereunder;
(e)“electronic record” means the electronic record as defined under clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);
(f)“electronic Registry” means an electronic repository or storage system of the Central Government in which the information or documents are received, stored, protected and preserved in electronic form;
(g)“Fees” means the fees as specified in the Companies (Registration Offices and Fees) Rules, 2014;
(h)“Form” or “e-Form” means a form set forth in Annexure to these rules which shall be used for the matter to which it relates;
(i)“Regional Director” means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional Director;
(j)“section” means section of the Act;
(k)For the purposes of clause (d) of sub-section (1) of section 164 and clause (f) of sub-section (1) of section 167 of the Act, “or otherwise” means any offence in respect of which he has been convicted by a Court under the Act or under the Companies Act, 1956.

(2) Words and expressions used in these rules and not defined but defined under the Act or under the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) or the Information Technology Act, 2000 (21 of 2000) or the Companies (Specification of Definitions Details) Rules, 2014 shall have the meanings respectively assigned to them in the Act or in those Acts or such rules.

Woman director on the Board

3. The following class of companies shall appoint at least one woman director—

(i)every listed company;
(ii)every other public company having—
(a)paid-up share capital of one hundred crore rupees or more; or
(b)turnover of three hundred crore rupees or more :

Provided that a company, which has been incorporated under the Act and is covered under provisions of second proviso to sub-section (1) of section 149 shall comply with such provisions within a period of six months from the date of its incorporation :

Provided further that any intermittent vacancy of a woman director shall be filled-up by the Board at the earliest but not later than immediate next Board meeting or three months from the date of such vacancy whichever is later.

Explanation.—For the purposes of this rule, it is hereby clarified that the paid up share capital or turnover, as the case may be, as on the last date of latest audited financial statements shall be taken into account.

Number of independent directors

4. The following class or classes of companies shall have at least two directors as independent directors—

(i)the Public Companies having paid up share capital of ten crore rupees or more; or
(ii)the Public Companies having turnover of one hundred crore rupees or more; or
(iii)the Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding fifty crore rupees :

Provided that in case a company covered under this rule is required to appoint a higher number of independent directors due to composition of its audit committee, such higher number of independent directors shall be applicable to it :

Provided further that any intermittent vacancy of an independent director shall be filled-up by the Board at the earliest but not later than immediate next Board meeting or three months from the date of such vacancy, whichever is later :

Provided also that where a company ceases to fulfil any of three conditions laid down in sub-rule (1) for three consecutive years, it shall not be required to comply with these provisions until such time as it meets any of such conditions;

Explanation.—For the purposes of this rule, it is hereby clarified that, the paid up share capital or turnover or outstanding loans, debentures and deposits, as the case may be, as existing on the last date of latest audited financial statements shall be taken into account :

Provided that a company belonging to any class of companies for which a higher number of independent directors has been specified in the law for the time being in force shall comply with the requirements specified in such law.

Qualifications of independent director

5. An independent director shall possess appropriate skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, corporate governance, technical operations or other disciplines related to the company’s business.

Creation and maintenance of databank of persons offering to become independent directors

6. (1) Any body, institute or association (hereinafter to be referred as “the agency”), which has been authorised in this behalf by the Central Government shall create and maintain a databank of persons willing and eligible to be appointed as independent director and such databank shall be placed on the website of the Ministry of Corporate Affairs or on any other website as may be approved or notified by the Central Government.

(2) The data bank referred to in sub-rule (1) shall contain the following details in respect of each person included in the data bank to be eligible and willing to be appointed as independent director—

(a)DIN (Director Identification Number);
(b)the name and surname in full;
(c)income-tax PAN;
(d)the father’s name and mother’s name and Spouse’s name (if married);
(e)the date of Birth;
(f)gender;
(g)the nationality;
(h)the occupation;
(i)full Address with PIN Code (present and permanent);
(j)phone number;
(k)e-mail id;
(l)the educational and professional qualifications;
(m)experience or expertise, if any;
(n)any legal proceedings initiated or pending against such person;
(o)the list of limited liability partnerships in which he is or was a designated partner along with—
(i)the name of the limited liability partnership;
(ii)the nature of industry; and
(iii)the duration- with dates;
(p)the list of companies in which he is or was director along with—
(i)the name of the company;
(ii)the nature of industry;
(iii)the nature of directorship – Executive or Non-executive or Managing Director or Independent Director or Nominee Director; and
(iv)duration – with dates.

(3) A disclaimer shall be conspicuously displayed on the website hosting the data bank that a company must carry out its own due diligence before appointment of any person as an independent director and “the agency” maintaining the data bank or the Central Government shall not be held responsible for the accuracy of information or lack of suitability of the person whose particulars form part of the databank.

(4) Any person who desires to get his name included in the databank of independent directors shall make an application to “the agency” in Form DIR-1.

(5) The agency may charge a reasonable fee from the applicant for inclusion of his name in the databank of independent directors.

(6) Any person who has applied for inclusion of his name in the databank of independent directors or any person whose name appears in the databank, shall intimate to the agency about any changes in his particulars within fifteen days of such change.

(7) The databank posted on the website shall—

(a)be accessible at the specified website;
(b)be substantially identical to the physical version of the databank;
(c)be searchable on the parameters specified in sub-rule (2);
(d)be presented in a format or formats convenient for both printing and viewing online; and
(e)contain a link to obtain the software required to view or print the particulars free of charge.

Small shareholders’ director

7. (1) A listed company, may upon notice of not less than one thousand small shareholders or one-tenth of the total number of such shareholders, whichever is lower, have a small shareholders’ director elected by the small shareholders :

Provided that nothing in this sub-rule shall prevent a listed company to opt to have a director representing small shareholders suo motu and in such a case the provisions of sub-rule (2) shall not apply for appointment of such director.

(2) The small shareholders intending to propose a person as a candidate for the post of small shareholders’ director shall leave a notice of their intention with the company at least fourteen days before the meeting under their signatures specifying the name, address, shares held and folio number of the person whose name is being proposed for the post of director and of the small shareholders who are proposing such person for the office of director :

Provided that if the person being proposed does not hold any shares in the company, the details of shares held and folio number need not be specified in the notice.

(3) The notice shall be accompanied by a statement signed by the person whose name is being proposed for the post of small shareholders’ director stating—

(a)his Director Identification Number;
(b)that he is not disqualified to become a director under the Act; and
(c)his consent to act as a director of the company.

(4) Such director shall be considered as an independent director subject to, his being eligible under sub-section (6) of section 149 and his giving a declaration of his independence in accordance with sub-section (7) of section 149 of the Act.

(5) The appointment of small shareholders’ director shall be subject to the provisions of section 152 except that—

(a)such director shall not be liable to retire by rotation;
(b)such director’s tenure as small shareholders’ director shall not exceed a period of three consecutive years; and
(c)on the expiry of the tenure, such director shall not be eligible for re-appointment.

(6) A person shall not be appointed as small shareholders’ director of a company, if the person is not eligible for appointment in terms of section 164.

(7) A person appointed as small shareholders’ director shall vacate the office if—

(a)the director incurs any of the disqualifications specified in section 164;
(b)the office of the director becomes vacant in pursuance of section 167;
(c)the director ceases to meet the criteria of independence as provided in sub-section (6) of section 149.

(8) No person shall hold the position of small shareholders’ director in more than two companies at the same time :

Provided that the second company in which he has been appointed shall not be in a business which is competing or is in conflict with the business of the first company.

(9) A small shareholders’ director shall not, for a period of three years from the date on which he ceases to hold office as a small shareholders’ director in a company, be appointed in or be associated with such company in any other capacity, either directly or indirectly.

Consent to act as director

8. Every person who has been appointed to hold the office of a director shall on or before the appointment furnish to the company a consent in writing to act as such in Form DIR-2 :

Provided that the company shall, within thirty days of the appointment of a director, file such consent with the Registrar in Form DIR-12 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014.

Application for allotment of Director Identification Number

9. (1) Every individual, who is to be appointed as director of a company shall make an application electronically in Form DIR-3, to the Central Government for the allotment of a Director Identification Number (DIN) along with such fees as provided in the Companies (Registration Offices and Fees) Rules, 2014.

(2) The Central Government shall provide an electronic system to facilitate submission of application for the allotment of DIN through the portal on the website of the Ministry of Corporate Affairs.

(3) (a) The applicant shall download Form DIR-3 from the portal, fill in the required particulars sought therein and sign the form and after attaching copies of the following documents, scan and file the entire set of documents electronically—

(i)photograph;
(ii)proof of identity;
(iii)proof of residence;
(iv)verification by the applicant for applying for allotment of DIN in Form DIR-4; and
(v)specimen signature duly verified.

(b) Form DIR-3 shall be signed and submitted electronically by the applicant using his or her own Digital Signature Certificate and shall be verified digitally by—

(i)a chartered accountant in practice or a company secretary in practice or a cost accountant in practice; or
(ii)a company secretary in full time employment of the company or by the managing director or director of the company in which the applicant is to be appointed as director.

Allotment of DIN

10. (1) On the submission of the Form DIR-3 on the portal and payment of the requisite amount of fees through online mode the provisional DIN shall be generated by the system automatically which shall not be utilized till the DIN is confirmed by the Central Government.

(2) After generation of the provisional DIN, the Central Government shall process the applications received for allotment of DIN under sub- rule (2) of rule 9, decide on the approval or rejection thereof and communicate the same to the applicant along with the DIN allotted in case of approval by way of a letter by post or electronically or in any other mode, within a period of one month from the receipt of such application.

(3) If the Central Government, on examination, finds such application to be defective or incomplete in any respect, it shall give intimation of such defect or incompleteness, by placing it on the website and by e-mail to the applicant who has filed such application, directing the applicant to rectify such defects or incompleteness by resubmitting the application within a period of fifteen days of such placing on the website and e-mail :

Provided that the Central Government shall—

(a)reject the application and direct the applicant to file fresh application with complete and correct information, where the defect has been rectified partially or the information given is still found to be defective;
(b)treat and label such application as invalid in the electronic record in case the defects are not removed within the given time; and
(c)inform the applicant either by way of letter by post or electronically or in any other mode.

(4) In case of rejection or invalidation of application, the provisional DIN so allotted by the system shall get lapsed automatically and the fee so paid with the application shall neither be refunded nor adjusted with any other application.

(5) All Director Identification Numbers allotted to individual(s) by the Central Government before the commencement of these rules shall be deemed to have been allotted to them under these rules.

(6) The Director Identification Number so allotted under these rules is valid for the life-time of the applicant and shall not be allotted to any other person.

Cancellation or surrender or Deactivation of DIN

11. The Central Government or Regional Director (Northern Region), Noida or any officer authorised by the Regional Director may, upon being satisfied on verification of particulars or documentary proof attached with the application received from any person, cancel or deactivate the DIN in case—

(a)the DIN is found to be duplicated in respect of the same person provided the data related to both the DIN shall be merged with the validly retained number;
(b)the DIN was obtained in a wrongful manner or by fraudulent means;
(c)of the death of the concerned individual;
(d)the concerned individual has been declared as a person of unsound mind by a competent Court;
(e)if the concerned individual has been adjudicated an insolvent :
Provided that before cancellation or deactivation of DIN pursuant to clause (b), an opportunity of being heard shall be given to the concerned individual;
(f)on an application made in Form DIR-5 by the DIN holder to surrender his or her DIN along with declaration that he has never been appointed as director in any company and the said DIN has never been used for filing of any document with any authority, the Central Government may deactivate such DIN :

Provided that before deactivation of any DIN in such case, the Central Government shall verify e-records.

Explanation.—For the purposes of clause (b)—

(i)the term “wrongful manner” means if the DIN is obtained on the strength of documents which are not legally valid or incomplete documents are furnished or on suppression of material information or on the basis of wrong certification or by making misleading or false information or by misrepresentation;
(ii)the term “fraudulent means” means if the DIN is obtained with an intent to deceive any other person or any authority including the Central Government.

Intimation of changes in particulars specified in DIN application

12. (1) Every individual who has been allotted a Director Identification Number under these rules shall, in the event of any change in his particulars as stated in Form DIR-3, intimate such change(s) to the Central Government within a period of thirty days of such change(s) in Form DIR-6 in the following manner, namely:—

(i)the applicant shall download Form DIR-6 from the portal and fill in the relevant changes, attach copy of the proof of the changed particulars and verification in the Form DIR-7 all of which shall be scanned and submitted electronically;
(ii)the form shall be digitally signed by a chartered accountant in practice or a company secretary in practice or a cost accountant in practice;
(iii)the applicant shall submit the Form DIR-6;

(2) The Central Government, upon being satisfied, after verification of such changed particulars from the enclosed proofs, shall incorporate the said changes and inform the applicant by way of a letter by post or electronically or in any other mode confirming the effect of such change in the electronic database maintained by the Ministry.

(3) The DIN cell of the Ministry shall also intimate the change(s) in the particulars of the director submitted to it in Form DIR-6 to the concerned Registrar(s) under whose jurisdiction the registered office of the company(s) in which such individual is a director is situated.

(4) The concerned individual shall also intimate the change(s) in his particulars to the company or companies in which he is a director within fifteen days of such change.

Notice of candidature of a person for directorship

13. The company shall, at least seven days before the general meeting, inform its members of the candidature of a person for the office of a director or the intention of a member to propose such person as a candidate for that office—

(1) by serving individual notices, on the members through electronic mode to such members who have provided their e-mail addresses to the company for communication purposes, and in writing to all other members; and

(2) by placing notice of such candidature or intention on the website of the company, if any :

Provided that it shall not be necessary for the company to serve individual notices upon the members as aforesaid, if the company advertises such candidature or intention, not less than seven days before the meeting at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated, and circulating in that district, and at least once in English language in an English newspaper circulating in that district.

Disqualification of directors sub-section (2) of section 164

14. (1) Every director shall inform to the company concerned about his disqualification under sub-section (2) of section 164, if any, in Form DIR-8 before he is appointed or re-appointed.

(2) Whenever a company fails to file the financial statements or annual returns, or fails to repay any deposit, interest, dividend, or fails to redeem its debentures, as specified in sub-section (2) of section 164, the company shall immediately file Form DIR-9, to the Registrar furnishing therein the names and addresses of all the directors of the company during the relevant financial years.

(3) When a company fails to file the Form DIR-9 within a period of thirty days of the failure that would attract the disqualification under sub-section (2) of section 164, officers of the company specified in clause (60) of section 2 of the Act shall be the officers in default.

(4) Upon receipt of the Form DIR-9 under sub-rule (2), the Registrar shall immediately register the document and place it in the document file for public inspection.

(5) Any application for removal of disqualification of directors shall be made in Form DIR-10.

Notice of resignation of director

15. The company shall within thirty days from the date of receipt of notice of resignation from a director, intimate the Registrar in Form DIR-12 and post the information on its website, if any.

Copy of resignation of director to be forwarded by him

16. Where a director resigns from his office, he shall within a period of thirty days from the date of resignation, forward to the Registrar a copy of his resignation along with reasons for the resignation in Form DIR-11 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014.

Register of directors and key managerial personnel

17. (1) Every company shall keep at its registered office a register of its directors and key managerial personnel containing the following particulars, namely:—

(a)Director Identification Number (optional for key managerial personnel);
(b)present name and surname in full;
(c)any former name or surname in full;
(d)father’s name, mother’s name and spouse’s name (if married) and surnames in full;
(e)date of birth;
(f)residential address (present as well as permanent);
(g)nationality (including the nationality of origin, if different);
(h)occupation;
(i)date of the board resolution in which the appointment was made;
(j)date of appointment and reappointment in the company;
(k)date of cessation of office and reasons therefor;
(l)office of director or key managerial personnel held or relinquished in any other body corporate;
(m)membership number of the Institute of Company Secretaries of India in case of Company Secretary, if applicable; and
(n)Permanent Account Number (mandatory for key managerial personnel if not having DIN).

(2) In addition to the details of the directors or key managerial personnel, the company shall also include in the aforesaid Register the details of securities held by them in the company, its holding company, subsidiaries, subsidiaries of the company’s holding company and associate companies relating to—

(a)the number, description and nominal value of securities;
(b)the date of acquisition and the price or other consideration paid;
(c)date of disposal and price and other consideration received;
(d)cumulative balance and number of securities held after each transaction;
(e)mode of acquisition of securities;
(f)mode of holding – physical or in dematerialized form; and
(g)whether securities have been pledged or any encumbrance has been created on the securities.

Return containing the particulars of directors and the key managerial personnel

18. A return containing the particulars of appointment of director or key managerial personnel and changes therein, shall be filed with the Registrar in Form DIR-12 along with such fee as may be provided in the Companies (Registration Offices and Fees) Rules, 2014 within thirty days of such appointment or change, as the case may be.

CHAPTER XII : MEETINGS OF BOARD AND ITS POWERS

COMPANIES (MEETINGS OF BOARD AND ITS POWERS) RULES, 2014

In exercise of powers conferred under sections 173, 175, 177, 178, 179, 184, 185, 186, 187, 188, 189 and section 191 read with section 469 of the Companies Act, 2013 and in supersession of the Companies (Central Government General) Rules and Forms or any other Rules prescribed under the Companies Act, 1956 on matters covered under these rules, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely:—

Short title and commencement

1. (1) These rules may be called the Companies (Meetings of Board and its Powers) Rules, 2014.

(2) They shall come into force on the date of their publication in the Official Gazette.

Definitions

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013;
(b)“Annexure” means the Annexure appended to these rules;
(c)“Fees” means the fees as specified in the Companies (Registration Offices and Fees) Rules, 2014;
(d)“Form” or “e-Form” means a form set forth in Annexure to these rules which shall be used for the matter to which it relates;
(e)“Related party” means a director or key managerial personnel of the holding company or his relative with reference to a company, shall be deemed to be a related party;
(f)“section” means the section of the Act.

(2) Words and expressions used in these rules but not defined and defined in the Act or in the Companies (Specification of Definitions Details) Rules, 2014, shall have the same meanings respectively assigned to them in the Act or in the said Rules.

Meetings of Board through video conferencing or other audio visual means

3. A company shall comply with the following procedure, for convening and conducting the Board meetings through video conferencing or other audio visual means.

(1) Every Company shall make necessary arrangements to avoid failure of video or audio visual connection.

(2) The Chairperson of the meeting and the company secretary, if any, shall take due and reasonable care—

(a)to safeguard the integrity of the meeting by ensuring sufficient security and identification procedures;
(b)to ensure availability of proper video conferencing or other audio visual equipment or facilities for providing transmission of the communications for effective participation of the directors and other authorised participants at the Board meeting;
(c)to record proceedings and prepare the minutes of the meeting;
(d)to store for safekeeping and marking the tape recording(s) or other electronic recording mechanism as part of the records of the company at least before the time of completion of audit of that particular year.
(e)to ensure that no person other than the concerned director are attending or have access to the proceedings of the meeting through video conferencing mode or other audio visual means; and
(f)to ensure that participants attending the meeting through audio visual means are able to hear and see the other participants clearly during the course of the meeting:
Provided that the persons, who are differently abled, may make request to the Board to allow a person to accompany him.

(3) (a) The notice of the meeting shall be sent to all the directors in accordance with the provisions of sub-section (3) of section 173 of the Act.

(b) The notice of the meeting shall inform the directors regarding the option available to them to participate through video conferencing mode or other audio visual means, and shall provide all the necessary information to enable the directors to participate through video conferencing mode or other audio visual means.

(c) A director intending to participate through video conferencing or audio visual means shall communicate his intention to the Chairperson or the company secretary of the company.

(d) If the director intends to participate through video conferencing or other audio visual means, he shall give prior intimation to that effect sufficiently in advance so that company is able to make suitable arrangements in this behalf.

(e ) The director, who desire, to participate may intimate his intention of participation through the electronic mode at the beginning of the calendar year and such declaration shall be valid for one calendar year.

(f) In the absence of any intimation under clause (c), it shall be assumed that the director shall attend the meeting in person.

(4) At the commencement of the meeting, a roll call shall be taken by the Chairperson when every director participating through video conferencing or other audio visual means shall state, for the record, the following namely:—

(a)name;
(b)the location from where he is participating;
(c)that he has received the agenda and all the relevant material for the meeting; and
(d)that no one other than the concerned director is attending or having access to the proceedings of the meeting at the location mentioned in clause (b);

(5) (a) After the roll call, the Chairperson or the Company Secretary shall inform the Board about the names of persons other than the directors who are present for the said meeting at the request or with the permission of the Chairperson and confirm that the required quorum is complete.

Explanation.—A director participating in a meeting through video conferencing or other audio visual means shall be counted for the purpose of quorum, unless he is to be excluded for any items of business under any provisions of the Act or the rules.

(b) The Chairperson shall ensure that the required quorum is present throughout the meeting.

(6) With respect to every meeting conducted through video conferencing or other audio visual means authorised under these rules, the scheduled venue of the meeting as set forth in the notice convening the meeting, which shall be in India, shall be deemed to be the place of the said meeting and all recordings of the proceedings at the meeting shall be deemed to be made at such place.

(7) The statutory registers which are required to be placed in the Board meeting as per the provisions of the Act shall be placed at the scheduled venue of the meeting and where such registers are required to be signed by the directors, the same shall be deemed to have been signed by the directors participating through electronic mode, if they have given their consent to this effect and it is so recorded in the minutes of the meeting.

(8) (a) Every participant shall identify himself for the record before speaking on any item of business on the agenda.

(b) If a statement of a director in the meeting through video conferencing or other audio visual means is interrupted or garbled, the Chairperson or Company Secretary shall request for a repeat or reiteration by the Director.

(9) If a motion is objected to and there is a need to put it to vote, the Chairperson shall call the roll and note the vote of each director who shall identify himself while casting his vote.

(10) From the commencement of the meeting and until the conclusion of such meeting, no person other than the Chairperson, Directors, Company Secretary and any other person whose presence is required by the Board shall be allowed access to the place where any director is attending the meeting either physically or through video conferencing without the permission of the Board.

(11) (a) At the end of discussion on each agenda item, the Chairperson of the meeting shall announce the summary of the decision taken on such item along with names of the directors, if any, who dissented from the decision taken by majority.

(b) The minutes shall disclose the particulars of the directors who attended the meeting through video conferencing or other audio visual means.

(12) (a) The draft minutes of the meeting shall be circulated among all the directors within fifteen days of the meeting either in writing or in electronic mode as may be decided by the Board.

(b) Every director who attended the meeting, whether personally or through video conferencing or other audio visual means, shall confirm or give his comments in writing, about the accuracy of recording of the proceedings of that particular meeting in the draft minutes, within seven days or some reasonable time as decided by the Board, after receipt of the draft minutes failing which his approval shall be presumed.

(c) After completion of the meeting, the minutes shall be entered in the minute book as specified under section 118 of the Act and signed by the Chairperson.

Explanation.—For the purposes of this rule, “video conferencing or other audio visual means” means audio visual electronic communication facility employed which enables all the persons participating in a meeting to communicate concurrently with each other without an intermediary and to participate effectively in the meeting.

Matters not to be dealt with in a meeting through video conferencing or other audio visual means

4. (1) The following matters shall not be dealt with in any meeting held through video conferencing or other audio visual means—

(i)the approval of the annual financial statements;
(ii)the approval of the Board’s report;
(iii)the approval of the prospectus;
(iv)the Audit Committee Meetings for consideration of accounts; and
(v)the approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.

Passing of resolution by circulation

5. A resolution in draft form may be circulated to the directors together with the necessary papers for seeking their approval, by electronic means which may include E-mail or fax.

Committees of the Board

6. The Board of directors of every listed companies and the following classes of companies shall constitute an Audit Committee and a Nomination and Remuneration Committee of the Board—

(i)all public companies with a paid up capital of ten crore rupees or more;
(ii)all public companies having turnover of one hundred crore rupees or more;
(iii)all public companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding fifty crore rupees or more.

Explanation.—The paid up share capital or turnover or outstanding loans, or borrowings or debentures or deposits, as the case may be, as existing on the date of last audited Financial Statements shall be taken into account for the purposes of this rule.

Establishment of vigil mechanism

7. (1) Every listed company and the companies belonging to the following class or classes shall establish a vigil mechanism for their directors and employees to report their genuine concerns or grievances—

(a)the Companies which accept deposits from the public;
(b)the Companies which have borrowed money from banks and public financial institutions in excess of fifty crore rupees.

(2) The companies which are required to constitute an audit committee shall oversee the vigil mechanism through the committee and if any of the members of the committee have a conflict of interest in a given case, they should recuse themselves and the others on the committee would deal with the matter on hand.

(3) In case of other companies, the Board of directors shall nominate a director to play the role of audit committee for the purpose of vigil mechanism to whom other directors and employees may report their concerns.

(4) The vigil mechanism shall provide for adequate safeguards against victimisation of employees and directors who avail of the vigil mechanism and also provide for direct access to the Chairperson of the Audit Committee or the director nominated to play the role of Audit Committee, as the case may be, in exceptional cases.

(5) In case of repeated frivolous complaints being filed by a director or an employee, the audit committee or the director nominated to play the role of audit committee may take suitable action against the concerned director or employee including reprimand.

Powers of Board

8. In addition to the powers specified under sub-section (3) of section 179 of the Act, the following powers shall also be exercised by the Board of Directors only by means of resolutions passed at meetings of the Board—

(1)to make political contributions;
(2)to appoint or remove key managerial personnel (KMP);
(3)to take note of appointment(s) or removal(s) of one level below the Key Management Personnel;
(4)to appoint internal auditors and secretarial auditor;
(5)to take note of the disclosure of director’s interest and shareholding;
(6)to buy, sell investments held by the company (other than trade investments), constituting five per cent or more of the paid up share capital and free reserves of the investee company;
(7)to invite or accept or renew public deposits and related matters;
(8)to review or change the terms and conditions of public deposit;
(9)to approve quarterly, half yearly and annual financial statements or financial results as the case may be.

Disclosures by a director of his interest

9. (1) Every director shall disclose his concern or interest in any company or companies or bodies corporate (including shareholding interest), firms or other association of individuals, by giving a notice in writing in FormMBP 1.

(2) It shall be the duty of the director giving notice of interest to cause it to be disclosed at the meeting held immediately after the date of the notice.

(3) All notices shall be kept at the registered office and such notices shall be preserved for a period of eight years from the end of the financial year to which it relates and shall be kept in the custody of the company secretary of the company or any other person authorized by the Board for the purpose.

Loans to Director etc. under section 185

10. (1) Any loan made by a holding company to its wholly owned subsidiary company or any guarantee given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company is exempted from the requirements under this section; and

(2) Any guarantee given or security provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company is exempted from the requirements under this section:

Provided that such loans made under sub-rules (1) and (2) are utilised by the subsidiary company for its principle business activities.

Loan and investment by a company under section 186 of the Act

11. (1) Where a loan or guarantee is given or where a security has been provided by a company to its wholly owned subsidiary company or a joint venture company, or acquisition is made by a holding company, by way of subscription, purchase or otherwise of, the securities of its wholly owned subsidiary company, the requirement of sub-section (3) of section 186 shall not apply:

Provided that the company shall disclose the details of such loans or guarantee or security or acquisition in the financial statement as provided under sub-section (4) of section 186.

(2) For the purposes of clause (a) of sub-section (11) of section 186, the expression “business of financing of companies” shall include, with regard to a Non-Banking Financial Company registered with Reserve Bank of India, “business of giving of any loan to a person or provi-ding any guaranty or security for due repayment of any loan availed by any person in the ordinary course of its business”.

(3) No company registered under section 12 of the Securities and Exchange Board of India Act, 1992 and also covered under such class or classes of companies which may be notified by the Central Government in consultation with the Securities and Exchange Board, shall take any inter-corporate loan or deposits, in excess of the limits specified under the regulations applicable to such company, pursuant to which it has obtained certificate of registration from the Securities and Exchange Board of India.

Register

12. (1) Every company giving loan or giving guarantee or providing security or making an acquisition of securities shall, from the date of its incorporation, maintain a register in Form MBP 2 and enter therein separately, the particulars of loans and guarantees given, securities provided and acquisitions made as aforesaid.

(2) The entries in the register shall be made chronologically in respect of each such transaction within seven days of making such loan or giving guarantee or providing security or making acquisition.

(3) The register shall be kept at the registered office of the company and the register shall be preserved permanently and shall be kept in the custody of the company secretary of the company or any other person authorised by the Board for the purpose.

(4) The entries in the register (either manual or electronic) shall be authenticated by the company secretary of the company or by any other person authorised by the Board for the purpose.

(5) For the purpose of sub-rule (4), the register can be maintained either manually or in electronic mode.

(6) The extracts from the register maintained under sub-section (9) of section 186 may be furnished to any member of the company on payment of such fee as may be prescribed in the Articles of the company which shall not exceed ten rupees for each page.

Special Resolution

13. (1) Where the aggregate of the loans and investment so far made, the amount for which guarantee or security so far provided to or in all other bodies corporate along with the investment, loan, guarantee or security proposed to be made or given by the Board, exceed the limits specified under section 186 no investment or loan shall be made or guarantee shall be given or security shall be provided unless previously authorised by a special resolution passed in a general meeting.

Explanation.—For the purpose of this sub-rule, it is clarified that it would sufficient compliance if such special resolution is passed within one year from the date of notification of this section.

(2) A resolution passed at a general meeting in terms of sub-section (3) of section 186 to give any loan or guarantee or investment or providing any security or the acquisition under sub-section (2) of section 186 shall specify the total amount up to which the Board of Directors are authorised to give such loan or guarantee, to provide such security or make such acquisition:

Provided that the company shall disclose to the members in the financial statement the full particulars in accordance with the provision of sub-section (4) of section 186.

Investments of company to be held in its own name

14. (1) Every company shall, from the date of its registration, maintain a register in Form MBP 3 and enter therein, chronologically, the particulars of investments in shares or other securities beneficially held by the company but which are not held in its own name and the company shall also record the reasons for not holding the investments in its own name and the relationship or contract under which the investment is held in the name of any other person.

(2) The company shall also record whether such investments are held in a third party’s name for the time being or otherwise.

(3) The register shall be maintained at the registered office of the company. The register shall be preserved permanently and shall be kept in the custody of the company secretary of the company or if there is no company secretary, any director or any other officer authorised by the Board for the purpose.

(4) The entries in the register shall be authenticated by the company secretary of the company or by any other person authorised by the Board for the purpose.

Contract or arrangement with a related party

15. A company shall enter into any contract or arrangement with a related party subject to the following conditions, namely:—

(1) The agenda of the Board meeting at which the resolution is proposed to be moved shall disclose—

(a)the name of the related party and nature of relationship;
(b)the nature, duration of the contract and particulars of the contract or arrangement;
(c)the material terms of the contract or arrangement including the value, if any;
(d)any advance paid or received for the contract or arrangement, if any;
(e)the manner of determining the pricing and other commercial terms, both included as part of contract and not considered as part of the contract;
(f)whether all factors relevant to the contract have been considered, if not, the details of factors not considered with the rationale for not considering those factors; and
(g)any other information relevant or important for the Board to take a decision on the proposed transaction.

(2) Where any director is interested in any contract or arrangement with a related party, such director shall not be present at the meeting during discussions on the subject matter of the resolution relating to such contract or arrangement.

(3) For the purposes of first proviso to sub-section (1) of section 188, except with the prior approval of the company by a special resolution—

(i)a company having a paid-up share capital of ten crore rupees or more shall not enter into a contract or arrangement with any related party; or
(ii)a company shall not enter into a transaction or transactions, where the transaction or transactions to be entered into—
(a)as contracts or arrangements with respect to clauses (a) to (e) of sub-section (1) of section 188 with criteria, as mentioned below—
(i)sale, purchase or supply of any goods or materials directly or through appointment of agents exceeding twenty-five per cent of the annual turnover as mentioned in clause(a) and clause (e) respectively of sub-section (1) of section 188;
(ii)selling or otherwise disposing of, or buying, property of any kind directly or through appointment of agents exceeding ten per cent of net worth as mentioned in clause (b) and clause (e) respectively of sub-section (1) of section 188;
(iii)leasing of property of any kind exceeding ten per cent of the net worth or exceeding ten per cent of turnover as mentioned in clause (c) of sub-section (1) of section 188;
(iv)availing or rendering of any services directly or through appointment of agents exceeding ten per cent of the net worth as mentioned in clause (d) and clause (e) of sub-section (1) of section 188;
(b)appointment to any office or place of profit in the company, its subsidiary company or associate company at a monthly remuneration exceeding two and half lakh rupees as mentioned in clause (f) of sub-section (1) of section 188; or
(c)remuneration for underwriting the subscription of any securities or derivatives thereof of the company exceeding one per cent of the net worth as mentioned in clause (g) of sub-section (1) of section 188.

Explanation.—(1) The Turnover or Net Worth referred in the above sub-rules shall be on the basis of the Audited Financial Statement of the preceding Financial year.

(2) In case of wholly owned subsidiary, the special resolution passed by the holding company shall be sufficient for the purpose of entering into the transactions between wholly owned subsidiary and holding company.

(3) The explanatory statement to be annexed to the notice of a general meeting convened pursuant to section 101 shall contain the following particulars namely:—

(a)name of the related party;
(b)name of the director or key managerial personnel who is related, if any;
(c)nature of relationship;
(d)nature, material terms, monetary value and particulars of the contract or arrangement;
(e)any other information relevant or important for the members to take a decision on the proposed resolution.

Register of contracts or arrangements in which directors are interested

16. (1) Every company shall maintain one or more registers in Form MBP 4, and shall enter therein the particulars of—

(a)company or companies or bodies corporate, firms or other association of individuals, in which any director has any concern or interest, as mentioned under sub-section (1) of section 184:
Provided that the particulars of the company or companies or bodies corporate in which a director himself together with any other director holds two per cent or less of the paid-up share capital would not be required to be entered in the register;
(b)contracts or arrangements with a body corporate or firm or other entity as mentioned under sub-section (2) of section 184, in which any director is, directly or indirectly, concerned or interested; and
(c)contracts or arrangements with a related party with respect to transactions to which section 188 applies.

(2) The entries in the register shall be made at once, whenever there is a cause to make entry, in chronological order and shall be authenticated by the company secretary of the company or by any other person authorised by the Board for the purpose.

(3) The register shall be kept at the registered office of the company and the register shall be preserved permanently and shall be kept in the custody of the company secretary of the company or any other person authorised by the Board for the purpose.

(4) The company shall provide extracts from such register to a member of the company on his request, within seven days from the date on which such request is made upon the payment of such fee as may be specified in the articles of the company but not exceeding ten rupees per page.

Payment to director for loss of office, etc. in connection with transfer of undertaking, pro-perty or shares

17. (1) No director of a company shall receive any payment by way of compensation in connection with any event mentioned in sub-section (1) unless the following particulars are disclosed to the members of the company and they pass a resolution at a general meeting approving the payment of such amount—

(a)name of the director;
(b)amount proposed to be paid;
(c)event due to which compensation become payable;
(d)date of Board meeting recommending such payment;
(e)basis for the amount determined;
(f)reason or justification for the payment;
(g)manner of payment – whether payable in cash or otherwise and how;
(h)sources of payment; and
(i)any other relevant particulars as the Board may think fit.

(2) Any payment made by a company by way of compensation for the loss of office or as a consideration for retirement from office or in connection with such loss or retirement, to a managing director or whole time director or manager of the company shall not exceed the limit as set out under section 202.

(3) No payment shall be made to the managing director or whole time director or manager of the company by way of compensation for the loss of office or as consideration for retirement from office (other than notice pay and statutory payments in accordance with the terms of appointment of such director or manager, as applicable) or in connection with such loss or retirement if—

(a)the company is in default in repayment of public deposits or payment of interest thereon;
(b)the company is in default in redemption of debentures or payment of interest thereon;
(c)the company is in default in repayment of any liability, secured or unsecured, payable to any bank, public financial institution or any other financial institution;
(d)the company is in default in payment of any dues towards income-tax, VAT, excise duty, service tax or any other tax or duty, by whatever name called, payable to the Central Government or any State Government, statutory authority or local authority (other than in cases where the company has disputed the liability to pay such dues);
(e)there are outstanding statutory dues to the employees or workmen of the company which have not been paid by the company (other than in cases where the company has disputed the liability to pay such dues); and
(f)the company has not paid dividend on preference shares or not redeemed preference shares on due date.

Explanation.—Pending notification of sub-section (1) of section 247 of the Act and finalisation of qualifications and experience of valuers, valuation of stocks, shares, debentures, securities etc. will be conducted by an independent merchant banker who is registered with the Securities and Exchange Board of India or an independent chartered accountant in practice having a minimum experience of ten years.

CHAPTER XIII : APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL

COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

In exercise of the powers conferred under sub-section (4) of section 196, sub-section (5) of section 197, sub-section (12) of section 197, section 200, sub-section (1) of section 198, sub-section (1) of section 203, sub-section (1) of section 204 and sub-section (1) of section 205 of the Companies Act, 2013, read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013) and in supersession of the Companies (Central Government’s) General Rules and Forms, 1956 or any other relevant rules prescribed under the Companies Act, 1956 (1 of 1956) on matters covered under these rules, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

(2) They shall come into force on the 1st day of April, 2014.

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Annexure” means the Annexure to these rules;
(c)“Fees” means the fees as specified in the Companies (Registration Offices and Fees) Rules, 2014;
(d)“Form” or “e form” means a form set forth in Annexure to these rules which shall be used for the matter to which it relates;
(e)“Regional Director” means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional Director;
(f)“section” means section of the Act.

(2) Words and expressions used in these rules but not defined and defined in the Act or in Companies (Specification of Definitions Details) Rules, 2014 shall have the meanings respectively assigned to them in the Act and said rules.

Filing of return of appointment.

3. A company shall file a return of appointment of a Managing Director, Whole Time Director or Manager, Chief Executive Officer (CEO), Company Secretary and Chief Financial Officer (CFO) within sixty days of the appointment, with the Registrar in Form No. MR.1 along with such fee as may be specified for this purpose.

Sitting fees.

4. A company may pay a sitting fee to a director for attending meetings of the Board or committees thereof, such sum as may be decided by the Board of directors thereof which shall not exceed one lakh rupees per meeting of the Board or committee thereof:

Provided that for Independent Directors and Women Directors, the sitting fee shall not be less than the sitting fee payable to other directors.

Disclosure in Board’s report.

5. (1) Every listed company shall disclose in the Board’s report—

(i)the ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year;
(ii)the percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year;
(iii)the percentage increase in the median remuneration of employees in the financial year;
(iv)the number of permanent employees on the rolls of company;
(v)the explanation on the relationship between average increase in remuneration and company performance;
(vi)comparison of the remuneration of the Key Managerial Personnel against the performance of the company;
(vii)variations in the market capitalisation of the company, price earnings ratio as at the closing date of the current financial year and previous financial year and percentage increase over decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer in case of listed companies, and in case of unlisted companies, the variations in the net worth of the company as at the close of the current financial year and previous financial year;
(viii)average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration;
(ix)comparison of the each remuneration of the Key Managerial Personnel against the performance of the company;
(x)the key parameters for any variable component of remuneration availed by the directors;
(xi)the ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year; and
(xii)affirmation that the remuneration is as per the remuneration policy of the company.

Explanation.- For the purposes of this rule.—

(i)the expression “median” means the numerical value separating the higher half of a population from the lower half and the median of a finite list of numbers may be found by arranging all the observations from lowest value to highest value and picking the middle one;
(ii)if there is an even number of observations, the median shall be the average of the two middle values.

(2) The Board’s report shall include a statement showing the name of every employee of the company, who—

(i)if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than sixty lakh rupees;
(ii)if employed for a part of the financial year, was in receipt of remuneration for any part of that year, at a rate which, in the aggregate, was not less than five lakh rupees per month;
(iii)if employed throughout the financial year or part thereof, was in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two per cent of the equity shares of the company.

(3) The statement referred to in sub-rule (2) shall also indicate—

(i)designation of the employee;
(ii)remuneration received;
(iii)nature of employment, whether contractual or otherwise;
(iv)qualifications and experience of the employee;
(v)date of commencement of employment;
(vi)the age of such employee;
(vii)the last employment held by such employee before joining the company;
(viii)the percentage of equity shares held by the employee in the company within the meaning of clause (iii) of sub-rule (2) above; and
(ix)whether any such employee is a relative of any director or manager of the company and if so, name of such director or manager:

Provided that the particulars of employees posted and working in a country outside India, not being directors or their relatives, drawing more than sixty lakh rupees per financial year or five lakh rupees per month, as the case may be, as may be decided by the Board, shall not be circulated to the members in the Board’s report, but such particulars shall be filed with the Registrar of Companies while filing the financial statement and Board Reports:

Provided further that such particulars shall be made available to any shareholder on a specific request made by him in writing before the date of such Annual General Meeting wherein financial statements for the relevant financial year are proposed to be adopted by shareholders and such particulars shall be made available by the company within three days from the date of receipt of such request from shareholders:

Provided also that in case of request received even after the date of completion of Annual General Meeting, such particulars shall be made available to the shareholders within seven days from the date of receipt of such request.

Applications to the Central Government.

6. The Central Government or the company shall have regard to the following matters, namely:—

(1)the Financial and operating performance of the company during the three preceding financial years.
(2)the relationship between remuneration and performance.
(3)the principle of proportionality of remuneration within the company, ideally by a rating methodology which compares the remuneration of directors to that of other directors on the Board who receives remuneration and employees or executives of the company.
(4)whether remuneration policy for directors differs from remuneration policy for other employees and if so, an explanation for the difference.
(5)the securities held by the director, including options and details of the shares pledged as at the end of the preceding financial year.

Fees.

7. (1) Every application made to the Central Government under the provisions of Chapter XIII shall be made in Form No. MR.2 and shall be accompanied by fee as may be specified for the purpose.

(2) The companies other than listed companies and subsidiary of a listed company may without Central Government approval pay remuneration to its managerial personnel, in the event of no profit or inadequate profit beyond ceiling specified in Section II, Part II of Schedule V, subject to complying with the following conditions namely:—

(i)payment of remuneration is approved by a resolution passed by the Board and, in the case of a company covered under sub-section (1) of section 178 also by the Nomination and Remuneration Committee, if any, and while doing so record in writing the clear reason and justification for payment of remuneration beyond the said limit;
(ii)the company has not made any default in repayment of any of its debts (including public deposits) or debentures or interest payable thereon preference shares and dividend on preference shares for a continuous period of thirty days in the preceding financial year before the date of payment to such managerial personnel;
(iii)the approval of shareholders by way of a special resolution at a general meeting of the company for payment of remuneration for a period not exceeding three years;
(iv)a statement along-with a notice calling the general meeting referred to clause (iii) of sub-rule (2) above, shall contain the information as per sub-clause (iv) of second proviso to clause (B) of section II of part-II of Schedule V of the Act including reasons and justification for payment of remuneration beyond the said limit;
(v)the company has filed Balance Sheet and Annual Return which are due to be filed with the Registrar of Companies.

(3) Every such application seeking approval shall be made to the Central Government within a period of ninety days from the date of such appointment.

Appointment of Key Managerial Personnel.

8. Every listed company and every other public company having a paid-up share capital of ten crore rupees or more shall have whole-time key managerial personnel.

Secretarial Audit Report.

9. (1) For the purposes of sub-section (1) of section 204, the other class of companies shall be as under—

(a)every public company having a paid-up share capital of fifty crore rupees or more; or
(b)every public company having a turnover of two hundred fifty crore rupees or more.

(2) The format of the Secretarial Audit Report shall be in Form No. MR.3.

Duties of Company Secretary.

10. The duties of Company Secretary shall also discharge, the following duties, namely:—

(1)to provide to the directors of the company, collectively and individually, such guidance as they may require, with regard to their duties, responsibilities and powers;
(2)to facilitate the convening of meetings and attend Board, committee and general meetings and maintain the minutes of these meetings;
(3)to obtain approvals from the Board, general meeting, the Government and such other authorities as required under the provisions of the Act;
(4)to represent before various regulators, and other authorities under the Act in connection with discharge of various duties under the Act;
(5)to assist the Board in the conduct of the affairs of the company;
(6)to assist and advise the Board in ensuring good corporate governance and in complying with the corporate governance requirements and best practices; and
(7)to discharge such other duties as have been specified under the Act or rules; and
(8)such other duties as may be assigned by the Board from time to time.

CHAPTER XIV : INSPECTION, INQUIRY AND INVESTIGATION

COMPANIES (INSPECTION, INVESTIGATION AND INQUIRY) RULES, 2014

In exercise of the powers conferred under sub-section (2) of section 211, sub-section (5) of section 211, section 214, sub-section (3) of section 210, and sub-section (11) of section 217, read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013) and in supersession of the Companies (Central Government’s) General Rules and Forms, 1956 or any other relevant rules prescribed under the Companies Act, 1956 (1 of 1956) on matters covered under these rules, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called the Companies (Inspection, Investigation and Inquiry) Rules, 2014.

(2) They shall come into force on the 1st day of April, 2014.

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Annexure” means the Annexure to these rules;
(c)“Fees” means the fees as specified in the Companies (Registration Offices and Fees) Rules, 2014;
(d)“Form” or “e form” means a form set forth in Annexure to these rules which shall be used for the matter to which it relates;
(e)“Regional Director” means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional Director;
(f)“section” means the section of the Act.

(2) Words and expressions used in these rules but not defined and defined in the Act or in Companies (Specification of Definitions Details) Rules, 2014 shall have the meanings respectively assigned to them in the Act and said rules.

Appointment of persons having expertise in various fields.

3. The Central Government may appoint persons having expertise in the fields of investigations, cyber forensics, financial accounting, management accounting, cost accounting and any other fields as may be necessary for the efficient discharge of Serious Fraud Investigation Office (SFIO) functions under the Act.

Terms and Condition of service.

4. The terms and conditions of service of Director, experts and other officers and employees of the Serious Fraud Investigation Office under sub-section (5) of section 211 shall be as under—

(a)the terms and conditions of appointment of Director shall be governed by the deputation rules under the Central Staffing Scheme of Government of India;
(b)the terms and conditions of service of experts from the Central Government or the State Government or Union territory Government, Public Sector Undertaking, Autonomous Bodies and such other organizations shall be as per the recruitment rules which may be duly notified by the Central Government under article 309 of the Constitution of India;
(c)the terms and conditions of service of other officers and employees from the Central Government or the State Government or Union territory Government, Public Sector Undertaking, Autonomous Bodies and such other organizations shall be as per the recruitment rules which may be duly notified by the Central Government under article 309 of the Constitution of India;
(d)the Central Government may appoint experts or consultants or other professionals or professional firms on contractual basis as per the scheme of engagement of experts or consultants which may be duly approved by the Central Government.

Security.

5. (1) The Central Government may before appointing an inspector under sub-section (3) of section 210, require the applicant to give a security not exceeding twenty-five thousand rupees for payment of the costs and expenses of investigation as per the criteria given below—

S. No.Turnover as per previous year balance sheet (Rs.)Amount of security (Rs.)
1Turnover up to Rs. 50 croreRs. 10,000
2Turnover more than Rs. 50 crore and up to 200 croreRs. 15,000
3Turnover more than Rs. 200 croreRs. 25,000

(2) The security shall be refunded to the applicant if the investigation results in prosecution.

Letter of Request, as per section 217.

6. The letter of request shall be transmitted in such manner as specified by the Ministry of Corporate Affairs.

CHAPTER XXI : COMPANIES AUTHORISED TO REGISTER UNDER THIS ACT

COMPANIES (AUTHORISED TO REGISTERED) RULES, 2014

In exercise of the powers conferred by sub-section (1) of section 164, sub-section (1) of section 466, section 367, and section 374 read with sub-section (1) and sub-section (2) of section 469 of the Companies Act, 2013 (18 of 2013) and in supersession of Companies (Central Government’s) General Rules and Forms, 1956 prescribed under the Companies Act, 1956 (1 of 1956) in so far as they relate to the matters covered under these rules, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called the Companies (Authorised to Registered) Rules, 2014.

(2) They shall come into force on 1st day of April, 2014.

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Schedule” means the schedule annexed to these Rules;
(c)“fees” means the fees as specified in the Companies (Registration Offices and Fees) Rules, 2014;
(d)“Form” or “e-form” means the form in the schedule to these rules which shall be used for the matter to which it relates;
(e)“Regional Director” means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional Director;
(f)“Registrar (LLP)” means the Registrar dealing with the matters relations to Limited Liability Partnership.

(2) Words and expressions used in these rules but not defined and defined in the Act or in Companies (Specification of Definitions Details) Rules, 2014 shall have the meanings respectively assigned to them in the Act and said rules.

3. (1) For the purposes of sub-section (2) of section 366 of the Act, the provision of Chapter II relating to incorporation of company and matters incidental thereto shall be applicable mutatis mutandis for such registration:

Provided that there shall be seven or more members for the purposes of registration of a company under this sub-rule.

(2) A company after obtaining availability of name in terms of the provisions of section 4 of the Act, shall attach the required documents and information to the Registrar along with Form No. URC. 1 in the following manner, namely:—

(a) For registration as a company limited by shares:

(i)A list showing the names, addresses, and occupations of all persons named therein as members with details of shares held by them respectively, showing separately shares allotted for consideration in cash and for consideration other than cash along-with the source of consideration and distinguishing, in cases where the shares are numbered, each share by its number ,who on a day, not being more than six clear days before the day of seeking registration, were partners of the Limited Liability Partnership;
(ii)a list showing the particulars of persons proposed as the first directors of the company, their names, including surnames or family names, the DIN , passport number(if any) with expiry date, residential addresses and their interests in other firms or bodies corporate along with their consent to act as directors of the company;
(iii)an affidavit from each of the persons proposed as the first directors, that he is not disqualified to be a director under sub-section (1) of section 164 and that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief;
(iv)a list containing the names and addresses of the Partners of the Limited Liability Partnership;
(v)a copy of the Act of Parliament or other Indian law, deed of partnership, bye laws or other instrument constituting or regulating the company and duly verified in the manner provided in sub-rule (4)
(vi)a statement specifying the following particulars: —
(i)the nominal share capital of the company and the number of shares into which it is divided;
(ii)the number of shares taken and the amount paid on each share;
(iii)the name of the company, with the addition of the word “Limited” or “Private Limited” as the case may require, as the last word or words thereof;
(vii)written consent or No Objection Certificate from all the secured creditors of the applicant;
(viii)written consent from the majority of members whether present in person or by proxy at a general meeting agreeing for registration under this part.

(b) For registration as a company limited by guarantee or as an unlimited company;

(i)a list showing the names, addresses and occupations of all persons, who on a day, not being more than six clear days before the day of seeking registration, were members of the company with proof of membership;
(ii)a list showing the particulars of persons proposed as the first directors of the company, their names, including surnames or family names, the DIN, passport number (if any) with expiry date, residential addresses and their interests in other firms or bodies corporate along with their consent to act as directors of the company;
(iii)an affidavit from each of the first directors, that he is not disqualified to be a director under sub-section (1) of section 164 and that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief;
(iv)a list containing the names and addresses of the Partners of the Limited Liability Partnership;
(v)a copy of the Act of Parliament or other Indian law, bye-laws or other instrument constituting or regulating the company duly verified in the manner provided in rule (4);
(vi)in the case of a company intended to be registered as a company limited by guarantee, a copy of the resolution declaring the amount guarantee;
(vii)Written consent or No Objection Certificate from all the secured creditors of the applicant;
(viii)Written consent from the majority of members whether present in person or by proxy at a general meeting agreeing for registration under this part.

(3) An affidavit, duly notarised, from all the members or partners providing that in the event of registration as a company under Part I of Chapter XXI of the Act, necessary documents or papers shall be submitted to the registering or other authority with which the company was earlier registered, for its dissolution as Limited Liability Partnership.

(4) The list of members and directors and any other particulars relating to the company which are required to be delivered to the Registrar shall be duly verified by the declaration of any two or more proposed directors , or two or more designated partners of the Limited Liability Partnership

Obligation of companies seeking registration to make publication.

4. (1) For the purpose of clause (b) of section 374 of the Act, every ‘company’ seeking registration under the provision of Part I of Chapter XXI shall publish an advertisement about registration under the said Part, seekingobjections, if any within twenty one clear days from the date of publication of notice and the said advertisement shall be in Form No. URC. 2, which shall be published in a newspaper and in English and the in the principal vernacular language of the district in which Limited Liability Partnership is in existence and circulated in that district.

(2) A copy of the notice, as published and the copy of the notice served on Registrar (LLP) along with proof of service, shall be attached with Form No. URC. 1.

(3) The Registrar shall, after considering the application and the objections, if any, received by him within thirty days from the date of publication of advertisement, and after ensuring that the company has addressed theobjections, suitably decide whether the registration should or should not be granted.

(4) If the Registrar in satisfied on the basis of documents and information filed by the applicants, decides that the applicant should be registered, he shall issue a certificate of incorporation in Form No. INC11.

Other obligations of companies seeking registration.

5. For the purpose of clause (d) of section 374 of the Act,—

(i)where a Limited Liability Partnership has obtained a certificate of registration under section 367, an intimation to this effect shall be given, within fifteen days of such registration to the concerned Registrar (LLP) under which it was originally registered, along with necessary documents or papers for its dissolution as Limited Liability Partnership;
(ii)statement of accounts, prepared not later than fifteen days preceding the date of seeking registration and certified by the Auditor together with the Audited Financial Statements of the previous year, wherever applicable shall be attached with Form No. URC. 1 :
Provided that if the assets of the existing company during the immediately preceding three years are revalued for the purpose of vesting of its assets with the company to be incorporated under this Act, the surplus arising out of such revaluation shall not be deemed to have been credited to the capital account or current account of partners.
(iii)notice shall be given to the concerned Registrar (LLP) under which it was originally registered and shall require that objections, if any to be made by such concerned Registrar of Companies (LLP) to the Registrar, shall be made within a period of twenty-one days from the date of such notice, failing which it shall be presumed that they have no objection and the notice shall disclose the purpose and substance of matters in relation to objections,
(iv)in case of the registration of Limited Liability Partnership into a company under these rules, a declaration by the said Limited Liability Partnership that it has filed all documents which are required to be filed under the Liability Partnership Act with the Registrar (LLP) and the declaration shall be attached with Form No. URC. 1;
(v)a statement of proceedings, if any, by or against the Limited Liability Partnership which are pending in any court or any other Authority shall be attached with Form No. URC. 1.

CHAPTER XXII : COMPANIES INCORPORATED OUTSIDE INDIA

COMPANIES (REGISTRATION OF FOREIGN COMPANIES) RULES, 2014

In exercise of the powers conferred under clause (c) and clause (h) of sub-section (1) and sub-section (3) of section 380, clause (a) of sub-section (1) and sub-section (3) of section 381, section 385, clause (a) of section 386, section 389 and section 390 read with section 469 of the Companies Act, 2013, and in supersession of the Companies (Central Government’s) General Rules and Forms, 1956 or any other rules prescribed under the Companies Act, 1956 (1 of 1956) on matters covered under these rules, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called the Companies (Registration of Foreign Companies) Rules, 2014.

(2) They shall come into force on the date of their publication in the Official Gazette.

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Annexure” means the Annexure enclosed to these rules;
(c)For the purposes of clause (42) of section 2 of the Act, “electronic mode” means carrying out electronically based, whether main server is installed in India or not, including, but not limited to—
(i)business to business and business to consumer transactions, data interchange and other digital supply transactions;
(ii)offering to accept deposits or inviting deposits or accepting deposits or subscriptions in securities, in India or from citizens of India;
(iii)financial settlements, web based marketing, advisory and transactional services, database services and products, supply chain management;
(iv)online services such as telemarketing, telecommuting, telemedicine, education and information research; and
(v)all related data communication services,
whether conducted by e-mail, mobile devices, social media, cloud computing, document management, voice or data transmission or otherwise;
(d)“fees” means the fees as specified in the Companies (Registration Offices and Fees) Rules, 2014;
(e)“Form” or “e-Form” means a form set forth in Annexure to these rules which shall be used for the matter to which it relates;
(f)“Schedule” means the Schedule to the Act;
(g)“section” means section of the Act.

(2) The words and expressions used in these rules but not defined and defined in the Act or in the Companies (Specification of Definitions Details) Rules, 2014 shall have the meanings respectively assigned to them in the Act or in the said rules.

Particulars relating to directors and Secretary to be furnished to the Registrar by foreign Companies.

3. (1) Every foreign company shall, within thirty days of establishment of its place of business in India, in addition to the particulars specified in sub-section (1) of section 380 of the Act, also deliver to the Registrar for registration, a list of directors and Secretary of such company.

(2) The list of directors and secretary or equivalent (by whatever name called) of the foreign company shall contain the following particulars, for each of the persons included in such list, namely:—

(a)personal name and surname in full;
(b)any former name or names and surname or surnames in full;
(c)father’s name or mother’s name and spouse’s name;
(d)date of birth;
(e)residential address;
(f)nationality;
(g)if the present nationality is not the nationality of origin, his nationality of origin;
(h)passport Number, date of issue and country of issue; (if a person holds more than one passport then details of all passports to be given)
(i)income-tax permanent account number (PAN) , if applicable;
(j)occupation, if any ;
(k)whether directorship in any other Indian company, (Director Identification Number (DIN), Name and Corporate Identity Number (CIN) of the company in case of holding directorship);
(l)other directorship or directorships held by him;
(m)Membership Number (for Secretary only); and
(n)e-mail ID.

(3) A foreign company shall, within a period of thirty days of the establishment of its place of business in India, file with the registrar Form FC-1 with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 and with the documents required to be delivered for registration by a foreign company in accordance with the provisions of sub-section (1) of section 380 and the application shall also be supported with an attested copy of approval from the Reserve Bank of India under Foreign Exchange Management Act or Regulations, and also from other regulators, if any, approval is required by such foreign company to establish a place of business in India or a declaration from the authorised representative of such foreign company that no such approval is required.

(4) Where any alteration is made or occurs in the document delivered to the Registrar for registration under sub-section (1) of section 380, the foreign company shall file with the Registrar, a return in Form FC-2 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 containing the particulars of the alteration, within a period of thirty days from the date on which the alteration was made or occurred.

Financial Statement of foreign company.

4. (1) Every foreign company shall prepare financial statement of its Indian business operations in accordance with Schedule III or as near thereto as may be possible for each financial year including—

(i)documents required to be annexed thereto in accordance with the provisions of Chapter IX of the Acti.e. Accounts of Companies ;
(ii)documents relating to copies of latest consolidated financial statements of the parent foreign company, as submitted by it to the prescribed authority in the country of its incorporation under the provisions of the law for the time being in force in that country:
Provided that where such documents are not in English language, there shall be annexed to it a certified translation thereof in the English language:
Provided further that where the Central Government has exempted or specified different documents for any foreign company or a class of foreign companies, then documents as specified shall be submitted;
(iii)Such other documents as may be required to be annexed or attached in accordance with sub-rule (2).

(2) Every foreign company shall, along with the financial statement required to be filed with the Registrar, attach thereto the following documents; namely:—

(a)Statement of related party transaction, which shall include—
(i)name of the person in India which shall be deemed to be the related party within the meaning of clause (76) of section 2 of the Act of the foreign company or of any subsidiary or holding company of such foreign company or of any firm in which such foreign company or its subsidiary or holding company is a partner;
(ii)nature of such relationship;
(iii)description and nature of transaction;
(iv)amount of such transaction during the year with opening, closing, highest and lowest balance during the year and provisions made (if any) in respect of such transactions;
(v)reason of such transaction;
(vi)material effect of such transaction on both the parties;
(vii)amount written off or written back in respect of dues from or to the related parties;
(viii)a declaration that such transactions were carried out at arms length basis; and
(ix)any other details of the transaction necessary to understand the financial impact;
(b)Statement of repatriation of profits which shall include—
(i)amount of profits repatriated during the year;
(ii)recipients of the repatriation;
(iii)form of repatriation;
(iv)dates of repatriation;
(v)details if repatriation made to a jurisdiction other than the residence of the beneficiary;
(vi)mode of repatriation; and
(vii)approval of the Reserve Bank of India or any other authority, if any.
(c)Statement of transfer of funds (including dividends if any) which shall, in relation of any fund transfer between place of business of foreign company in India and any other related party of the foreign company outside India including its holding, subsidiary and associate company, include—
(i)date of such transfer;
(ii)amount of fund transferred or received;
(iii)mode of receipt or transfer of fund;
(iv)purpose of such receipt or transfer; and
(v)approval of Reserve Bank of India or any other authority, if any.

(3) The documents referred to in this rule shall be delivered to the Registrar within a period of six months of the close of the financial year of the foreign company to which the documents relate:

Provided that the Registrar may, for any special reason, and on application made in writing by the foreign company concerned, extend the said period by a period not exceeding three months.

Audit of accounts of foreign company.

5. (1) Every foreign company shall get its accounts, pertaining to the Indian business operations prepared in accordance with the requirements of clause (a) of sub-section (1) of section 381 and rule 4, audited by a practicing Chartered Accountant in India or a firm or limited liability partnership of practicing chartered accountants.

Explanation.—For the purposes of this sub-rule, the expressions “Chartered Accountant”, “Firm” and limited liability partnership shall have the meanings respectively assigned to them under the Act and Limited Liability Partnership Act, 2008 (6 of 2009) respectively.

(2) The provisions of Chapter X i.e. Audit and Auditors and rules made thereunder, as far as applicable, shall apply, mutatis mutandis, to the foreign company.

List of places of business of foreign company.

6. Every foreign company shall file with the Registrar, along with the financial statement, in Form FC.3 with such fee as provided under Companies (Registration Offices and Fees) Rules, 2014 a list of all the places of business established by the foreign company in India as on the date of balance sheet.

Annual Return.

7. Every foreign company shall prepare and file, within a period of sixty days from the last day of its financial year, to the Registrar annual return in Form FC.4 along with such fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 containing the particulars as they stood on the close of the financial year.

Office where documents to be delivered and fee for registration of documents.

8. (1) Any document which any foreign company is required to deliver to the Registrar shall be delivered to the Registrar having jurisdiction over New Delhi, and references to the Registrar in Chapter XXII of the Act i.e.Companies Incorporated Outside India and these rules shall be construed accordingly.

(2) The fee to be paid to the Registrar for registering any document relating to a foreign company shall be such as provided in the Companies (Registration Offices and Fees) Rules, 2014.

(3) If any foreign company ceases to have a place of business in India, it shall forthwith give notice of the fact to the Registrar, and as from the date on which notice is so given, the obligation of the company to deliver any document to the Registrar shall cease, provided it has no other place of business in India.

Certification.

9. A copy of any charter, statutes, memorandum and articles, or other instrument constituting or defining the constitution of a Foreign company shall be duly certified to be a true copy in the manner given below—

(1) If the company is incorporated in a country outside the Commonwealth—

(a)the copy aforesaid shall be certified as a true copy by—
(i)an official of the Government to whose custody the original is situated; or
(ii)a Notary (Public) of such Country; or
(iii)an officer of the company.
(b)The signature or seal of the official referred to in sub-clause (i) of clause (a) or the certificate of the Notary (Public) referred to in sub-clause (ii) of clause (a) shall be authenticated by a diplomatic or consular officer empowered in this behalf under section 3 of the Diplomatic and Consular Officers (Oaths and Fees) Act, 1948 (XL of 1948), or where there is no such officer, by any of the officials mentioned in section 6 of the Commissioners of Oath Act, 1889 (52 and 53 Vic. C. 10), or in any relevant Act for the said purpose.
(c)The certificate of the officer of the company referred to in sub-clause (iii) of clause (a) shall be signed before a person having authority to administer an oath as provided under section 3 of the Diplomatic and Consular Officers (Oath and Fees) Act, 1948 (XL of 1948), or as the case may be, by section 3 of the Commissioners of Oath Act, 1889 (52 and 53 Vic. C. 10) and the status of the person administering the oath in the latter case being authenticated by any official specified in section 6 of the Commissioners of Oaths Act, 1889 (52 and 53 Vic. C. 10) or in any relevant Act for the said purpose.

(2) If the company is incorporated in any part of the Commonwealth, the copy of the document shall be certified as a true copy by—

(a)an official of the Government to whose custody the original of the document is committed; or
(b)a Notary (Public) in that part of the Commonwealth; or
(c)an officer of the company, on oath before a person having authority to administer an oath in that part of the Commonwealth.

(3) Any altered document delivered to the Registrar should also be duly certified in the manner mentioned above.

(4) If the Company is incorporated in a country falling outside the Commonwealth, but a party to the Hague Apostille Convention, 1961—

(a)the copy of the documents shall be certified as a true copy by an official of the Government to whose custody the original is committed and be duly apostillised in accordance with Hague Convention;
(b)a list of the directors and the secretary of the Company, if any, the name and address of persons resident in India, authorized to accept notice on behalf of the Company shall be duly notarized and be apostillised in the Country of their origin in accordance with Hague Convention;
(c)the signatures and address on the Memorandum of Association and proof of identity, where required, of foreign nationals seeking to register a company in India shall be notarized before the notary of the country of their origin and be duly apostillised in accordance with the said Hague Convention.

Authentication of translated documents.

10. (1) All the documents required to be filed with the Registrar by the foreign companies shall be in English language and where any such document is not in English language, there shall be attached a translation thereof in English language duly certified to be correct in the manner given in these rules.

(2) Where any such translation is made outside India, it shall be authenticated by the signature and the seal, if any, of—

(a)the official having custody of the original; or
(b)a Notary (Public) of the country (or part of the country) where the company is incorporated:
Provided that where the company is incorporated in a country outside the Commonwealth, the signature or seal of the person so certifying shall be authenticated by a diplomatic or consular officer empowered in this behalf under section 3 of the Diplomatic and Consular Officers (Oaths and Fees) Act, 1948, or, where there is no such officer, by any of the officials mentioned in section 6, of the Commissioners of Oaths Act, 1889 (52 and 53 Vic C 10), or in any relevant Act for the said purpose.

(3) Where such translation is made within India, it shall be authenticated by—

(a)an advocate, attorney or pleader entitled to appear before any High Court; or
(b)an affidavit, of a competent person having, in the opinion of the Registrar, an adequate knowledge of the language of the original and of English.

Documents to be annexed to prospectus.

11. The following documents shall be annexed to the prospectus, namely:—

(a)any consent to the issue of the prospectus required from any person as an expert;
(b)a copy of contracts for appointment of managing director or manager and in case of a contract not reduced into writing, a memorandum giving full particulars thereof;
(c)a copy of any other material contracts, not entered in the ordinary course of business, but entered within preceding two years;
(d)a copy of underwriting agreement; and
(e)a copy of power of attorney, if prospectus is signed through duly authorized agent of directors.

Action for improper use or description as foreign company.

12. If any person or persons trade or carry on business in any manner under any name or title or description as a foreign company registered under the Act or the rules made thereunder, that person or each of those persons shall, unless duly registered as foreign company under the Act and rules made thereunder, shall be liable for investigation under section 210 of the Act and action consequent upon that investigation shall be taken against that person.

Issue of Indian Depository Receipts (IDRs).

13. (1) For the purposes of section 390, no company incorporated or to be incorporated outside India, whether the company has or has not established, or may or may not establish, any place of business in India (hereinafter in this rule called ‘issuing company’) shall make an issue of Indian Depository Receipts (IDRs) unless such company complies with the conditions mentioned under this rule, in addition to the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 and any directions issued by the Reserve Bank of India.

Explanation.—For the purposes of this rule, the term “Indian Depository Receipt” (hereinafter referred to as ‘IDR’) means any instrument in the form of a depository receipt created by a Domestic Depository in India and authorized by a company incorporated outside India making an issue of such depository receipts.

(2) The issuing company shall not issue IDRs unless—

(a)its pre-issue paid-up capital and free reserves are at least US$ 50 million and it has a minimum average market capitalization (during the last three years) in its parent country of at least US$ 100 million;
(b)it has been continuously trading on a stock exchange in its parent or home country (the country of incorporation of such company) for at least three immediately preceding years;
(c)it has a track record of distributable profits in terms of section 123 of the Act, for at least three out of immediately preceding five years;
(d)It fulfils such other eligibility criteria as may be laid down by the Securities and Exchange Board of India from time to time in this behalf.

(3) The issuing company shall follow the following procedure for making an issue of IDRs:

(a)the issuing company shall, where required, obtain the necessary approvals or exemptions from the appropriate authorities from the country of its incorporation under the relevant laws relating to issue of capital and IDRs.
(b)issuing company shall obtain prior written approval from the Securities and Exchange Board of India on an application made in this behalf for issue of IDRs along with the issue size.
(c)an application under clause (b) shall be made to the Securities and Exchange Board of India (along with draft prospectus) at least ninety days prior to the opening date of the IDRs issue, in such form , along with such fee and furnishing such information as may be specified by the Securities and Exchange Board of India from time to time:
Provided that the issuing company shall also file with the Securities and Exchange Board of India, through a Merchant Banker, a due diligence report along with the application under clause (b) in the form specified by the Securities and Exchange Board of India.
(d)the Securities and Exchange Board of India may, within a period of thirty days of receipt of an application under clause (c), call for such further information, and explanations, as it may deem necessary, for disposal of such application and shall dispose the application within a period of thirty days of receipt of further information or explanation:
Provided that if within a period of sixty days from the date of submission of application or draft prospectus, the Securities and Exchange Board of India specifies any changes to be made in the draft prospectus, the prospectus shall not be filed with the Securities and Exchange Board of India or Registrar of Companies unless such changes have been incorporated therein.
(e)the issuing company shall on approval being granted by the Securities and Exchange Board of India to an application under clause (b), pay to the Securities and Exchange Board of India an issue fee as may be prescribed from time to time by the Securities and Exchange Board of India.
(f)the issuing company shall file a prospectus, certified by two authorized signatories of the issuing company, one of whom shall be a whole-time director and other the Chief Financial Officer stating the particulars of the resolution of the Board by which it was approved with the Securities and Exchange Board of India and Registrar of Companies, New Delhi before such issue:
Provided that at the time of filing of said prospectus with the Registrar of Companies, New Delhi, a copy of approval granted by the Securities and Exchange Board of India and the statement of fees paid by the Issuing Company to the Securities and Exchange Board of India shall also be attached.
(g)the prospectus to be filed with the Securities and Exchange Board of India and the Registrar of Companies, New Delhi shall contain the particulars as prescribed in sub-rule (8) and shall be signed by all the whole-time directors of the issuing company, and the Chief Financial Officer.
(h)the issuing company shall appoint an overseas custodian bank, a Domestic Depository and a Merchant Banker for the purpose of issue of IDRs.
(i)the issuing company may appoint underwriters registered with the Securities and Exchange Board of India to underwrite the issue of IDRs.
(j)the issuing company shall deliver the underlying equity shares or cause them to be delivered to an Overseas Custodian Bank and the said bank shall authorize the domestic depository to issue IDRs.
(k)the issuing company shall obtain in-principle listing permission from one or more stock exchanges having nationwide trading terminals in India.
Explanation.—For the purposes of this rule,—
(i)“Domestic Depository” means custodian of securities registered with the Securities and Exchange Board of India and authorized by the issuing company to issue IDRs.
(ii)“Merchant Banker” means a Merchant Banker as defined in sub-regulation (cb) of regulation 2 of the Securities and Exchange Board (Merchant Bankers) Regulations, 1992.
(iii)“Overseas Custodian Bank” means a banking company which is established in a country outside India and which acts as custodian for the equity shares of Issuing Company, against which IDRs are proposed to be issued by having a custodial arrangement or agreement with the Domestic Depository or by establishing a place of business in India.

(4) The Merchant Banker to the issue of IDRs shall deliver for registration the following documents or information to the Securities and Exchange Board of India and Registrar of Companies at New Delhi, namely:—

(a)instrument constituting or defining the constitution of the issuing company;
(b)the enactments or provisions having the force of law by or under which the incorporation of the Issuing company was effected, a copy of such provisions attested by an officer of the company be annexed;
(c)if the issuing company has established place of business in India, address of its principal office in India;
(d)if the issuing company does not establish a principal place of business in India, an address in India where the said instrument, enactments or provision or copies thereof are available for public inspection, and if these are not in English, a translation thereof certified by a key managerial personnel of the Issuing company shall be kept for public inspection;
(e)a certified copy of the certificate of incorporation of the issuing company in the country in which it is incorporated;
(f)the copies of the agreements entered into between the issuing company, the overseas custodian bank, the Domestic Depository, which shall inter alia specify the rights to be passed on to the IDR holders;
(g)if any document or any portion thereof required to be filed with the Securities and Exchange Board of India or the Registrar of Companies is not in English language, a translation of that document or portion thereof in English, certified by a key managerial personnel of the company to be correct and attested by an authorized officer of the Embassy or Consulate of that country in India, shall be attached to each copy of the document.

(5) (a) No application form for the securities of the issuing company shall be issued unless the form is accompanied by a memorandum containing the salient features of prospectus in the specified form.

(b) An application form can be issued without the memorandum as specified in clause (a), if it is issued in connection with an invitation to enter into an underwriting agreement with respect to the IDRs.

(c) The prospectus for subscription of IDRs of the Issuing company which includes a statement purporting to be made by an expert shall not be circulated, issued or distributed in India or abroad unless a statement that the expert has given his written consent to the issue thereof and has not withdrawn such consent before the delivery of a copy of the prospectus to the Securities and Exchange Board of India and the Registrar of Companies, New Delhi, appears on the prospectus.

(d) The provisions of the Act shall apply for all liabilities for misstatements in prospectus or punishment for fraudulently inducing persons to invest money in IDRs.

(e) The person(s) responsible for issue of the prospectus shall not incur any liability by reason of any non-compliance with or contravention of any provision of this rule, if—

(i)as regards any matter not disclosed, he proves that he had no knowledge thereof; or
(ii)the contravention arose in respect of such matters which in the opinion of the Central Government or the Securities and Exchange Board of India were not material.

(6) (a) A holder of IDRs may transfer the IDRs, may ask the Domestic Depository to redeem them or any person may seek reissuance of IDRs by conversion of underlying equity shares, subject to the provisions of the Foreign Exchange Management Act, 1999, the Securities and Exchange Board of India Act, 1992, or the rules, regulations or guidelines issued under these Acts, or any other law for the time being in force.

(b) In case of redemption, Domestic Depository shall request the Overseas Custodian Bank to get the corresponding underlying equity shares released in favour of the holder of IDRs for being sold directly on behalf of holder of IDRs, or being transferred in the books of Issuing company in the name of holder of IDRs and a copy of such request shall be sent to the issuing company for information.

(c) A holder of IDRs may, at any time, nominate a person to whom his IDRs shall vest in the event of his death and Form FC-5 may be used for this purpose.

(7) (a) The repatriation of the proceeds of issue of IDRs shall be subject to laws for the time being in force relating to export of foreign exchange.

(b) The number of underlying equity shares offered in a financial year through IDR offerings shall not exceed twenty five per cent of the post issue number of equity shares of the company.

(c) Notwithstanding the denomination of securities of an Issuing company, the IDRs issued by it shall be denominated in Indian Rupees.

(d) The IDRs issued under this Rule shall be listed on the recognized Stock Exchange(s) in India as specified inclause (k) of sub-rule (3) and such IDRs may be purchased, possessed and freely transferred by a person resident in India as defined in section 2(v) of the Foreign Exchange Management Act, 1999, subject to the provisions of the said Act:

Provided that the IDRs issued by an Issuing company may be purchased, possessed and transferred by a person other than a person resident in India if such Issuing company obtains specific approval from Reserve Bank of India in this regard or complies with any policy or guidelines that may be issued by Reserve Bank of India on the subject matter.

(e) Every issuing company shall comply with such continuous disclosure requirements as may be specified by the Securities and Exchange Board of India in this regard.

(f) On the receipt of dividend or other corporate action on the IDRs as specified in the agreements between the Issuing company and the Domestic Depository, the Domestic Depository shall distribute them to the IDR holders in proportion to their holdings of IDRs.

(8) The prospectus or letter of offer shall, inter alia, contain the following particulars, namely:—

(a)General information—
(i)Name and address of the registered office of the company;
(ii)name and address of the Domestic Depository, the Overseas Custodian Bank with the address of its office in India, the Merchant Banker, the underwriter to the issue and any other intermediary which may be appointed in connection with the issue of IDRs;
(iii)names and addresses of Stock Exchanges where applications are made or proposed to be made for listing of the IDRs;
(iv)the provisions relating to punishment for fictitious applications;
(v)statement or declaration for refund of excess subscription;
(vi)declaration about issue of allotment letters or certificates or IDRs within the stipulated period;
(vii)date of opening of issue;
(viii)date of closing of issue;
(ix)date of earliest closing of the issue;
(x)declaration by the Merchant Banker with regard to adequacy of resources of underwriters to discharge their respective obligations, in case of being required to do so;
(xi)a statement by the Issuing company that all moneys received out of issue of IDRs shall be transferred to a separate domestic bank account, name and address of the bank and the nature and number of the account to which the amount shall be credited;
(xii)the details of proposed utilisation of the proceeds of the IDR issue.
(b)Capital Structure of the Company – The authorized, issued, subscribed and paid-up capital of the issuing company;
(c)Terms of the issue—
(i)rights of the IDR holders against the underlying securities;
(ii)details of availability of prospectus and forms, i.e., date, time, place etc.;
(iii)amount and mode of payment seeking issue of IDRs; and
(iv)any special tax benefits for the Issuing company and holders of IDRs in India.
(d)Particulars of Issue—
(i)the objects of the issue;
(ii)the cost of the Project, if any; and
(iii)the means of financing the projects, if any including contribution by promoters.
(e)Company, Management and Project—
(i)the main objects, history and present business of the company;
(ii)the Promoters or parent group or owner group and their background:
Provided that in case there are no identifiable promoters, the names, addresses and other particulars as may be specified by the Securities and Exchange Board of India of all the persons who hold five per cent, or more equity share capital of the company shall be disclosed;
(iii)the subsidiaries of the company, if any;
(iv)the particulars of the Management or Board (i.e. Name and complete address(es) of Directors, Manager, Managing Director or other principal officers of the company);
(v)the location of the project, if any;
(vi)the details of plant and machinery, infrastructure facilities, technology etc., where applicable;
(vii)the schedule of implementation of project and progress made so far, if applicable;
(viii)nature of product(s), consumer(s), industrial users;
(ix)the particulars of legal, financial and other defaults, if any;
(x)the risk factors to the issue as perceived; and
(xi)consent of the Merchant Bankers, Overseas Custodian Bank, the Domestic Depository and all other intermediaries associated with the issue of IDRs.
(xii)the information, as may be specified by the Securities and Exchange Board of India, in respect of listing, trading record or history of the Issuing company on all the stock exchanges, whether situated in its parent country or elsewhere.
(f)Report—
(i)Where the law of a country, in which the Issuing company is incorporated, requires annual statutory audit of the accounts of the Issuing company, a report by the statutory auditor of the Issuing company, in such form as may be specified by the Securities and Exchange Board of India on—
(A)the audited financial statements of the Issuing company in respect of three financial years immediately preceding the date of prospectus;
(B)the interim audited financial statements in respect of the period ending on a date which is less than 180 days prior to the date of opening of the issue, if the gap between the ending date of the latest audited financial statements disclosed under item (A) and the date of the opening of the issue is more than 180 days:
Provided that if the gap between such date of latest audited financial statements and the date of opening of issue is 180 days or less, the requirement under item (B) shall be deemed to be complied with, if a statement, as may be specified by the Securities and Exchange Board of India, in respect of material changes in the financial position of Issuing company for such gap is disclosed in the Prospectus:
Provided further that in case of an Issuing company which is a foreign bank incorporated outside India and which is regulated by a member of the Bank for International Settlements or a member of the International Organization of Securities Commissions which is a signatory to a Multilateral Memorandum of Understanding, the requirement under this paragraph, in respect of period beginning with last date of period for which the latest audited financial statements are made and the date of opening of the issue shall be satisfied, if the relevant financial statements are based on limited review report of such statutory auditor;
(ii)Where the law of the country, in which the Issuing company is incorporated, does not require annual statutory audit of the accounts of the Issuing company, a report, in such form as may be specified by the Securities and Exchange Board of India, certified by a Chartered Accountant in practice within the terms and meaning of the Chartered Accountants Act, 1949 on—
(A)the financial statements of the Issuing company, in particular on the profits and losses for each of the three financial years immediately preceding the date of prospectus and upon the assets and liabilities of the Issuing company; and
(B)the interim financial statements in respect of the period ending on a date which is less than one hundred and eighty days prior to the date of opening of the issue have to be included in report, if the gap between the ending date of the latest financial statements disclosed under item (A) and the date of the opening of the issue is more than one hundred and eighty days:
Provided that if the gap between such date of latest audited financial statements and the date of opening of issue is one hundred and eighty days or less, the requirement under item (B) shall be deemed to be complied with if a statement, as may be specified by the Securities and Exchange Board of India, in respect of changes in the financial position of Issuing company for such gap is disclosed in the Prospectus.
(iii)The gap between date of opening of issue and date of reports specified under sub-clauses (i) and (ii) shall not exceed one hundred and twenty days;
(iv)If the proceeds of the IDR issue are used for investing in other body(ies) corporate, then following details of such body(ies) corporate shall be given-
(A)the Name and address(es) of the bodies corporate;
(B)the reports stated in sub-clauses (i) and (ii), as the case may be, in respect of such body(ies) corporate also.
(g)Other Information—
(i)the Minimum subscription for the issue;
(ii)the fees and expenses payable to the intermediaries involved in the issue of IDRs;
(iii)the declaration with regard to compliance with the Foreign Exchange Management Act, 1999.
(h)Inspection of Documents—
The Place at which inspection of the offer documents, the financial statements and auditor’s report thereof shall be allowed during the normal business hours; and
(i)any other information as specified by the Securities and Exchange Board of India or the Income-tax Authorities or the Reserve Bank of India or other regulatory authorities from time to time.

CHAPTER XXIV : REGISTRATION OFFICES AND FEES

COMPANIES (REGISTRATION OFFICES AND FEES) RULES, 2014

In exercise of the powers conferred by sections 396, 398, 399, 403 and 404, read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013) and in supersession of Companies (Central Government’s) General Rules and Forms, 1956, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called of the Companies (Registration Offices and Fees) Rules, 2014.

(2) They shall come into force on the 1st day of April, 2014.

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Annexure” means Annexure to these rules;
(c)“Certifying Authority” for the purpose of “Digital Signature Certificate” means a person who has been granted a licence to issue it under section 24 of the Information Technology Act, 2000 (21 of 2000).
(d)“Digital Signature” means digital signature as defined under clause (p) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);
(e)“Digital Signature Certificate” means a Digital Signature Certificate as defined under clause (q) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000)
(f)“electronic record” means electronic record as defined under clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);
(g)“electronic registry” means an electronic repository or storage system of the Central Government in which the information or documents are received, stored, protected and preserved in electronic form;
(h)“electronic mail” means message sent, received or forwarded in digital form using any electronic communication mechanism such that the message so sent, received or forwarded is storable and retrievable;
(i)“Form” or “e-form” means a form set forth in Annexure to these rules which shall be used for the matter to which it relates;
(j)“Regional Director” means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional Director;
(k)“Registrar’s Facilitation Office” means an office maintained by the Central Government or an agency authorised by it to facilitate e-filing of documents into the electronic registry and their inspection and viewing;
(l)“Straight Through Process” means the process in which an e-form is approved through system without manual interruption.

(2) Words and expressions used in these rules but not defined and defined in the Act and the Information Technology Act, 2000 (21 of 2000) or in Companies (Specification of Definitions Details) Rules, 2014 shall have the meanings respectively assigned to them in those Acts and the said rules.

Business activity.

3. Every company including foreign company which carries out its business through electronic mode, whether its main server is installed in India or outside India, which—

(i)undertakes business to business and business to consumer transactions, data interchange or other digital supply transactions;
(ii)offers to accept deposits or invites deposits or accepts deposits or subscriptions in securities, in India or from citizens of India;
(iii)undertakes financial settlements, web based marketing, advisory and transactional services, database services or products, supply chain management;
(iv)offers online services such as telemarketing, telecommuting, telemedicine, education and information research; or
(v)undertakes any other related data communication services,
whether conducted by e-mail, mobile devices, social media, cloud computing, document management, voice or data transmission or otherwise, shall be deemed to have carried out business in India.

Registration offices.

4. (1) The Central Government shall establish such number of offices at such places as it thinks fit, specifying their jurisdiction for the purpose of exercising such powers and discharge of such functions as are conferred on the Central Government by or under this Act or under the rules made thereunder and for the purposes of registration of companies under the Act.

(2) The office of the Registrar shall observe such normal working hours as may be approved by the Central Government and shall be open for the transaction of business with the public on all days except Saturday, Sunday and public holidays during working hours between 10.30 a.m. and 3.30 p.m.

(3) The offices other than the office of the Registrar shall observe such normal working hours as may be approved by the Central Government.

Powers and duties of Registrars.

5. (1) The Registrars shall exercise such powers and discharge such duties as are conferred on them by the Act or the rules made thereunder or delegated to them by the Central Government, wherever the power or duty has been conferred upon the Central Government by the Act or the rules made thereunder.

(2) Whenever according to the Act, any function or duty is to be discharged by the Registrar, it shall, until the Central Government otherwise directs, be done by the Registrar, or in his absence, by such person as the Central Government may for the time being authorise:

Provided that in the event of the Central Government altering the constitution of the existing registry offices or any of them, any such function or duty shall be discharged by such officer and at such place, with reference to the local situation of the registered offices of the companies concerned, as the Central Government may appoint.

Seal of Registrar.

6. The Registrar shall have a seal and such seal shall bear the words “Registrar of Companies, …………………… (Place and State)”.

Manner and conditions of filing.

7. Every application, financial statement, prospectus, return, declaration, memorandum, articles, particulars of charges, or any other particulars or document or any notice, or any communication or intimation required to be filed or delivered or served under the Act and rules made thereunder, shall be filed or delivered or served in computer readable electronic form, in portable document format (pdf) or in such other format as has been specified in any rule or form in respect of such application or form or document or declaration to the Registrar through the portal maintained by the Central Government on its website or through any other website notified by the Central Government:

Provided that where the documents are required to be filed on Non-Judicial Stamp Paper, the company shall submit such documents in the physical form, in addition to their submission in electronic form, unless the Central Government, by an order, does not require submission in physical form and proof of delivery of documents submitted in physical form shall be scanned and form part of attachment to the e-form:

Provided further that if stamp duty on such documents is paid electronically through the portal maintained by the Central Government or through any other website notified by the Central Government, then, the company shall not be required to make physical submission of such documents, in addition to their submission in the electronic form:

Provided also that in respect of certain documents filed under the Act which are not covered for payment of stamp duty through the portal of the Central Government, and stamp duty payable on such documents in the respective State is equal to or less than one hundred rupees, the company shall scan such stamped documents complete in all respects and shall file electronically for evidencing by the Registrar and shall not be required to submit such documents, except those which are required to be filed for compounding of offences or adjudication of penalties or applications to Central Government or Regional Director in the physical form separately:

Provided also that unless otherwise stated in any law for the time being in force, the company shall retain such documents duly stamped in original permanently for the documents relating to incorporation and matters incidental thereto, changes in any of the clauses of the Memorandum and Articles of Association and in other cases for a minimum period of eight years from the date of filing of the documents and shall be required to produce the same as and when the same is required for inspection and verification by the competent authority under any law for the time being in force:

Provided also that any correspondences (physically or electronically) and documents to be filed by any person shall contain name, designation, address, membership number or Director Identification Number, as the case may be, of the person signing such document and make sure correctness thereof and in no case, correspondence, merely with signature and writing authorised signatory shall be acceptable.

Provided also that no request for recording any event based information or changes shall be accepted by the Registrar from such defaulting companies, unless they file their updated Balance Sheet and Profit and Loss Account and Annual Return with the Registrar of Companies except,—

(i)filing of order of Court or other authorities,
(ii)Balance Sheet and Profit and Loss Account,
(iii)Compounding application,
(iv)Form for transfer of money to Investor Education and Protection Fund,
(v)Application for removal of the Auditor and
(vi)GNL-1 for making company active.

Authentication of documents.

8. (1) An electronic form shall be authenticated by authorised signatories using digital signature.

(2) Where there is any change in directors or secretaries, the form relating to appointment of such directors or secretaries has to be filed by an continuing director or the secretary of the company.

(3) The authorised signatory and the professional, if any, who certify e-form shall be responsible for the correctness of the contents of e-form and correctness of the enclosures attached with the electronic form.

(4) Every person authorised for authentication of e-forms, documents or applications etc., which are required to be filed or delivered under the Act or rules made thereunder, shall obtain a digital signature certificate from the Certifying Authority for the purpose of such authentication and such certificate shall not be valid unless it is of Class II or Class III specification under the Information Technology Act, 2000 (21 of 2000).

(5) The electronic forms required to be filed under the Act or the rules thereunder shall be authenticated on behalf of the company by the Managing Director or Director or Secretary of the Company or other key managerial personnel.

(6) Scanned image of documents shall be of original signed documents relevant to the e-forms or forms and the scanned document image shall not be left blank without bearing the actual signature of authorised person.

(7) It shall be the sole responsibility of the person who is signing the form and professional who is certifying the form to ensure that all the required attachments relevant to the form have been attached completely and legibly as per provisions of the Act, and rules made thereunder to the forms or application or returns filed.

(8) The documents or form or application filed may contain a power of attorney issued to an Advocate or Chartered Accountant or Cost Accountant or Company Secretary who is in whole time practice and to any others person supported by Board resolution to make representation to the registering or approving authority failing which a Director or key managerial personnel can make representation before such authority.

(9) Where any instance of filing document, application or return etc, containing a false or misleading information or omission of material fact, requiring action under section 448 or section 449 is observed, the person shall be liable under sections 448 and 449 of the Act.

(10) Without prejudice to any other liability, in case of certification of any form, document, application or return under the Act containing wrong or false or misleading information or omission of material fact or attachments by the person, the Digital Signature Certificate shall be de-activated by the Central Government till a final decision is taken in this regard.

(11) The Central Government shall set up and maintain for filing of electronic forms, documents and applications, and for viewing and inspection of documents in the electronic registry or for obtaining certified copies thereof—

(a)a website or portal to provide access to the electronic registry; and
(b)as many Registrar’s Facilitation Offices as may be necessary and at such places and for such time as the Central Government may determine.

Maintaining documents electronically.

9. (1) The Central Government shall set up and maintain a secure electronic registry in which all the applications, financial statement, prospectus, return, register, memorandum, articles, particulars of charges, or any particulars or returns or any other documents filed under the Act to be electronically stored.

(2) Every document or certificate or notice or other document required to be registered or authenticated by the Registrar or an officer of the Central Government under the Act or rules made thereunder, shall be registered or authenticated through a valid digital signature of such person or a system generated digital signature.

(3) The Registrar shall issue document, certificate, notice, receipt, approval or communicate endorsement or acknowledgement in the electronic mode:

Provided that where the Registrar is not able to issue any certificate, receipt, endorsement, acknowledgement or approval in electronic mode for the reasons to be recorded in writing, he may issue such certificate or receipt or endorsement, acknowledgement or approval in the physical form under manual signature affixing seal of his office.

(4) The Registrar may send any document, certificate, notice or any other communication to the company or its authorised representative or directors or both in the electronic manner for which the company shall create and maintain at all times a valid electronic addresses including e-mail, user identifications capable of receiving and acknowledging the receipt of the document, certificate, notice or other communication, automated or otherwise.

Procedure on receipt of any application or form or document electronically.

10. (1) The Registrar shall examine or cause to be examined every application or e-Form or document required or authorised to be filed or delivered under the Act and rules made thereunder for approval, registration, taking on record or rectification by the Registrar, as the case may be:

Provided that save as otherwise provided in the Act, the Registrar shall take a decision on the application, e-form or documents within thirty days from the date of its filing excluding the cases in which an approval of the Central Government or the Regional Director or any other competent authority is required:

Provided further that the e-Forms or documents identified as informative in nature and filed under Straight Through Process may be examined by the Registrar at any time on suo motu or on receipt of any information or complaint from any source at any time after its filing:

Provided also that nothing contained in the first proviso shall affect the powers of the Registrar to call information or explanation in pursuance of section 206.

(2) Where the Registrar, on examining any application or e-Form or document referred to in sub-rule (1), finds it necessary to call for further information or finds such application or e-form or document to be defective or incomplete in any respect, he shall give intimation of such information called for or defects or incompleteness, by e-mail on the last intimated e-mail address of the person or the company, which has filed such application or e-form or document, directing him or it to furnish such information or to rectify such defects or incompleteness or to re-submit such application or e-Form or document within the period allowed under sub-rule (3):

Provided that in case the e-mail address of the person or the company in question is not available, the intimation shall be given by the Registrar by post at the last intimated registered office address of the company or the last intimated address of the person, as the case may be and the Registrar shall preserve the facts of the intimation in the electronic record.

(3) Except as otherwise provided in the Act, the Registrar shall allow fifteen days’ time to the person or company which has filed the application or e-Form or document under sub-rule (1) for furnishing further information or for rectification of the defects or incompleteness or for re-submission of such application or e-form or document.

(4) In case where such further information called for has not been provided or has been furnished partially or defects or incompleteness has not been rectified or has been rectified partially or has not been rectified as required within the period allowed under sub-rule (3), the Registrar shall either reject or treat the application or e-form or document, as the case may be, as invalid in the electronic record, and shall inform the person or company, as the case may be, in the manner as specified in sub-rule (2).

(5) Where any document has been recorded as invalid by the Registrar, the document may be rectified by the person or company only by fresh filing along with payment of fee and additional fee, as applicable at the time of fresh filing, without prejudice to any other liability under the Act.

(6) In case the Registrar finds any e-form or document filed under Straight Through Process as defective or incomplete in any respect, at any time suo motu or on receipt of information or compliant from any source at any time, he shall treat the e-form or document as defective in the electronic registry and shall also issue a notice pointing out the defects or incompleteness in the e-Form or document at the last intimated e-mail address of the person or the company which has filed the document, calling upon the person or company to file the e-Form or document afresh along with fee and additional fee, as applicable at the time of actual re-filing, after rectifying the defects or incompleteness within a period of thirty days from the date of the notice:

Provided that in case the e-mail address of the person or the company in question is not available, the intimation shall be given by the Registrar by post at the last intimated registered office address of the company or the last intimated address of the person, as the case may be and the Registrar shall preserve the facts of the intimation in the electronic record.

Vacation or removal of directors.

11. (1) In the event of vacation or removal of directors before approving or invalidating Form No. DIR-12, the Registrar shall verify the documents as to correctness of contents and whether adequate supporting documents namely, copy of board resolution, copy of notices sent for calling board meeting or copy of minutes of board of directors reflecting voted for or against.

(2) If the Registrar on verification of documents further finds that the company has violated any of the provisions of the Act or rules, he shall refer the matter to the Regional Director concerned, who shall enquire the matter by giving an opportunity to the person who has been removed or vacated as director and convey the decision of the matter to the Registrar within ninety days from the date of reference to him by the Registrar.

Fees.

12. (1) The documents required to be submitted, filed, registered or recorded or any fact or information required or authorised to be registered under the Act shall be submitted, filed, registered or recorded on payment of the fee or on payment of such additional fee as applicable, as mentioned in Table annexed to these rules.

(2) For the purpose of filing the documents or applications for which no e-form is prescribed under the various rules prescribed under the Act, the document or application shall be filed through Form No.GNL.1 or GNL.2along with fee as applicable and in case a single form is prescribed for multiple purposes, the fee shall be paid for each of the purposes contained in the single form.

Mode of Payment.

13. The fees, charges or other sums payable for filing any application, form, return or any other document in pursuance of the Act or any rule made thereunder shall be paid by means of credit card; or internet banking; or remittance at the counter of the authorised banks or any other mode as approved by the Central Government.

Inspection, production and evidence of documents kept by Registrar.

14. The inspection of the documents maintained in the electronic registry so set up in pursuance of rule 9 and which are otherwise available for inspection under the Act or rules made thereunder, shall be made by any person in electronic form.

Inspection of documents.

15. Any person may—

(a)inspect any document kept by the Registrar, being documents filed or registered by him in pursuance of this Act or the Companies Act, 1956 (1 of 1956) or making a record of any fact required or authorised to be recorded or registered in pursuance of this Act, on payment for each inspection of fee.
(b)require a certificate of incorporation of any company, or a copy or extract of any other document or any part of any other document to be certified by the Registrar, on payment of fee.

ANNEXURE

TABLE OF FEES

(Pursuant to rule 12 of the Companies (Registration of Offices and Fees) Rules, 2014)

I. FEE FOR FILINGS ETC. UNDER SECTION 403 OF THE COMPANIES ACT, 2013

Table of fees for the documents required to be submitted, filed, registered or recorded or for any fact or information required or authorized to be registered under the Act, shall be submitted filed, registered or recorded within the time specified in the relevant provision on payment of fee as prescribed hereunder :—

A. Table of fees to be paid to the registrar

(I) In respect of a company having a share capital :Other than OPCs and Small Companies*OPC and Small Companies
1. (a) For OPC and small companies whose nominal share capital does not exceeds Rs. 10,00,000.2000
(b) For OPC and small companies whose nominal share capital exceeds Rs. 10,00,000 and upto Rs. 50,00,000
(b) (i) For ever Rs. 10,000 of nominal share capital or part of Rs. 10,000 after the first Rs. 10,00,000 and upto Rs. 50,00,000200
(c) For registration of a company whose nominal share capital does not exceeds Rs. 1,00,000.5000
2. For registration of a company whose nominal share capital exceeds Rs. 1,00,000, the above fee of Rs. 5,000 with the following additional fees regulated according to the amount of nominal capital :
(a) for every Rs. 10,000 of nominal share capital or part of Rs. 10,000 after the first Rs. 1,00,000 upto Rs. 5,00,000400
(b) for every Rs. 10,000 of nominal share capital or part of Rs. 10,000 after the first Rs. 5,00,000 upto Rs. 50,00,000300150
(c) for every Rs. 10,000 of nominal share capital or part of Rs. 10,000 after the first Rs. 50,00,000 upto Rs. one crore100NA
(d) for every Rs. 10,000 of nominal share capital or part of Rs. 10,000 after the first Rs. 1 crore:75NA
Provided that where the additional fees, regulated according to the amount of the nominal capital of a company, exceeds a sum of rupees two crore and fifty lakh, the total amount of additional fees payable for the registration of such company shall not, in any case, exceed rupees two crore and fifty lakhs.
3. For filing a notice of any increase in the nominal share capital of a company, the difference between the fees payable on the increased share capital on the date of filing the notice for the registration of a company and the fees payable on existing authorized capital, at the rates prevailing on the date of filing the notice.
4. For registration of any existing company, except such companies as are by this Act exempted from payment of fees in respect of registration under this Act, the same fee is charged for registering a new company.
5. For submitting, filing, registering or recording any document by this Act required or authorised to be submitted, filed, registered or recorded.
(a) in respect of a company having a nominal share capital of upto Rs. 1,00,000.200
(b) in respect of a company having a nominal share capital of Rs. 1,00,000 or more but less than Rs. 5,00,000.300
(c) in respect of a company having a nominal share capital of Rs. 5,00,000 or more but less than Rs. 25,00,000400
(d) in respect of a company having a nominal share capital of Rs. 25,00,000 or more but less than Rs. 1 crore or more.500
(e) in respect of a company having a nominal share capital of Rs. 1 crore or more.600
6. For making a record of or registering any fact by this Act required or authorised to be recorded or registered by the Registrar –
(a) in respect of a company having a nominal share capital of upto Rs. 1,00,000.200
(b) in respect of a company having a nominal share capital of Rs. 1,00,000 or more but less than Rs. 5,00,000.300
(c) in respect of a company having a nominal share capital of Rs. 5,00,000 or more but less than Rs. 25,00,000400
(d) in respect of a company having a nominal share capital of Rs. 25,00,000 or more but less than Rs. 1 crore or more.500
(e) in respect of a company having a nominal share capital of Rs. 1 crore or more.600
7. For registration of a company whose number of members as stated in the articles of association, does not exceed 202000
8. For registration of a company whose number of members as stated in the articles of association, exceeds 20 but does not exceed 2005000
9. For registration of a company whose number of members as stated in the articles of association, exceeds 200 but is not stated to be unlimited, the above fee of Rs. 5,000 with an additional Rs. 10 for every member after first 200.
10. For registration of a company in which the number of members is stated in the articles of association to be unlimited.10000
11. For registration of any increase in the number of members made after the registration of the company, the same fees as would have been payable in respect of such increase, if such increase had been stated in the articles of association at the time of registration :
Provided that no company shall be liable to pay on the whole a greater fee than Rs. 10,000 in respect of its number of members, taking into account the fee paid on the first registration of the company.
12. For registration of any existing company except such companies as are by this Act exempted from payment of fees in respect of registration under this Act, the same fee as is charged for registering a new company.
13. For filing or registering any document by this Act required or authorized to be filed or registered with the Registrar.200
14. For making a record of or registering any fact by this Act required or authorized to be recorded or registered by the Registrar.200
(1)The above table prescribed for small companies (as defined under section 2(85) of the Act) and one person companies defined under Rule related to Chapter II r/w 2(62) of the Act shall be applicable provided the said company shall remain as said class of company for a period not less than one year from its incorporation.
(2)The above table of fee shall be applicable for any such intimation to be furnished to the Registrar or any other officer or authority under section 159 of the Act, filing of notice of appointment of auditors or Secretarial Auditor or Cost Auditor.
(3)The above table of fee and calculation of fee as applicable for increase in authorised capital shall be applicable for revised capital in accordance with sub-section (11) of 233 of the Act, (after setting off fee paid by the transferor company on its authorised capital prior to its merger or amalgamation with the transferee company).
(4)The above table of fee shall be applicable for filing revised financial statement or board report under sections 130 and 131 of the Act.

B. Following table of additional fees shall be applicable for delays in filing of the forms other than for increase in Nominal Share Capital

Sl. No.Period of delaysForms including charge documents
01upto 15 days (sections 93,139 and 157)One time
02More than 15 days and upto 30 days (Sections 93, 139 and 157) and upto 30 days in remaining forms.2 times of normal filing fees
03More than 30 days and upto 60 days4 times of normal filing fees
04More than 60 days and upto 90 days6 times of normal filing fees
05More than 90 days and upto 180 days10 times of normal filing fees
06More than 180 days and upto 270 days12 times of normal filing fees

Note:- (1) The additional fee shall also applicable to revised financial statement or board’s report under sections 130 and 131 of the Act and secretarial audit report filed by the company secretary in practice under section 204 of the Act.

(2) The belated filing of documents/forms (including increasing in nominal capital and delay caused thereon) which were due to be filed whether in Companies Act, 1956 Act or the Companies Act, 2013 Act i.e. due for filing prior to notification of these fee rules, the fee applicable at the time of actual filing shall be applicable.

C. For increase in authorised capital, the additional fees shall be applicable at the following rates:—

Delay upto 6 monthsDelay beyond 6 months
Slab2.5% per month on the fees payable under para I.3 or II.12 of Table A above as the case may be.3% per month on the fees payable under para I.3 or II.12 of Table A above as the case may be.

(1) The above fee table shall also be applicable for delay in filing application with Registrar under sub-section (11) of section 233 of the Act.

II. FEE ON APPLICATIONS (INCLUDING APPEAL) MADE TO CENTRAL GOVERNMENT UNDER SUB-SECTION (2) OF SECTION 459 OF THE COMPANIES ACT, 2013.

1For Application madeOther than OPCs and Small CompaniesOPC and Small Companies
(i)By a company having an authorized share capital of:
(a) Upto than Rs. 25,00,0002,0001000
(b) More than Rs. 25,00,00 and up Rs. 50,00,0005,0002500
(c) More than Rs. 50,00,000 and upto Rs. 5,00,00,00010,000
(d) More than Rs. 5,00,00,000 and upto Rs. 10 crores15,000
(e) More than Rs. 10 crores20,000
(ii)By a company limited by guarantee but not having a share capital2,000
(iii)By an Association or proposed company for issue of license under section 8 of the Act2,000
(iv)By a company having a valid license issued under section 8 of the Act2000
(v)By a foreign company5,000
(vi)Application for allotment of Director Identification Number (DIN) under section 153 of the Act500
(1)Every application to the Registrar of Companies filed by any person for reservation of name under sub-section (4) of section 4 of the Companies Act, 2013 shall be accompanied with the fee of Rs. 1,000.
(2)For every application made to Regional Director (including appeal) or Registrar of Companies (except specifically stated elsewhere), Table of fees as above shall be applicable.

Note: The separate fee schedule shall be prescribed under sub-section (2) of section 459 of the Act for applications to be filed before Tribunal.

III. ANNUAL FEE PAYABLE BY A DORMANT COMPANY UNDER SUB-SECTION (5) OF SECTION 455 OF THE COMPANIES ACT, 2013.

1For Application madeOther than OPCs and Small CompaniesOPC and Small Companies
(i)By a company having an authorized share capital of:
(a) Upto than Rs. 25,00,0002,0001000
(b) More than Rs. 25,00,00 and up Rs. 50,00,0005,0002500
(c) More than Rs. 50,00,000 and upto Rs. 5,00,00,00010,000
(d) More than Rs. 5,00,00,000 and upto Rs. 10 crores15,000
(e) More than Rs. 10 crores20,000
(ii)By a company limited by guarantee but not having a share capital2,000—-

IV. FEE FOR INSPECTION AND PROVIDING CERTIFIED COPIES OF DOCUMENTS KEPT BY THE REGISTRAR UNDER SECTION 399 OF THE ACT.

(i)Under clause (a) of sub-section (1) of section 399 of the Act – Rs.100
(ii)Under clause (b) of sub-section (1) of section 399 of the Act
(a)For copy of Certificate of Incorporation – Rs.100
(b)For copy or extract of other documents including hard copy of such document on computer readable media – Rs. 25 per page.

V. FEE FOR REGISTRATION OF DOCUMENTS UNDER SECTION 385 OF THE ACT.

Rs. 6000 for each document.

VI. FEES FOR REMOVAL OF NAMES OF COMPANIES FROM THE REGISTRAR OF COMPANIES UNDER SECTION 248(2) OF THE ACT.

Rs. 5000

INSTRUCTIONS

1.Payment of fees – Except as otherwise provided elsewhere, the table of fees annexed to the Companies (Registration Offices and Fees) Rules, 2014, shall be payable in the following head.

(1)fees payable to the Registrar in pursuance of the Act or any rule or regulation made or notification issued thereunder shall be paid to the Registrar on any authorized bank by the Ministry of Corporate Affairs and acting as the agent of the Reserve Bank of India for credit under the following head, namely :—
Major HeadAlphanumeric code descriptionAccount CodeSerial CodeSource category check digit
1475Other general Economic service Regulation of joint stock companies14750010514750006113
(a) Registration fees1475001059914750032114
(b) Filing fees1475001059814750033117
(c) inspection and copying fee1475001059714750034112
(d) other fees1475001059614750035119
(2)Where application is filed through electronic media or through any other computer readable media, the user may choose any one of the following payment options namely, (i) Credit Card; or (ii) Internet Banking; or (iii) Remittance at the Bank Counter or (iv) any other mode as approved by the Central Government. The requisite fee as specified in Companies (Registration Offices and Fees), Rules, 2014 shall be payable through any of the accredited branches of the following Banks.
(a)Punjab National Bank
(b)State Bank of India
(c)Indian Bank
(d)ICICI Bank
(e)HDFC Bank
(f)Union Bank of India
(3)The fees payable to the Registrars may be paid bank drafts payable at drawn on banks, located at the same city or town as the office of the Registrar.
(4)Where a fee payable to the Registrar is paid through bank drafts as, aforesaid it shall not be deemed to have been paid unless and until the relevant drafts are cashed and the amount credited.

CHAPTER XXVI : NIDHIS

NIDHI RULES, 2014

In exercise of the powers conferred under sub-section (1) of section 406 read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013, the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These Rules may be called Nidhi Rules, 2014.

(2) They shall come into force on the 1st day of April, 2014.

Application.

2. These rules shall apply to,—

(a)every company which had been declared as a Nidhi or Mutual Benefit Society under sub-section (1) of section 620A of the Companies Act, 1956;
(b)every company functioning on the lines of a Nidhi company or Mutual Benefit Society but has either not applied for or has applied for and is awaiting notification to be a Nidhi or Mutual Benefit Society under sub-section (1) of section 620A of the Companies Act, 1956; and
(c)every company incorporated as a Nidhi pursuant to the provisions of section 406 of the Act.

Definitions.

3. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Doubtful Asset” means a borrowal account which has remained a non-performing asset for more than two years but less than three years;
(c)“Loss Asset” means a borrowal account which has remained a non-performing asset for more than three years or where in the opinion of the Board, a shortfall in the recovery of the loan account is expected because the documents executed may become invalid if subjected to legal process or for any other reason;
(d)“Net Owned Funds” means the aggregate of paid up equity share capital and free reserves as reduced by accumulated losses and intangible assets appearing in the last audited balance sheet:
Provided that the amount representing the proceeds of issue of preference shares shall not be included for calculating Net Owned Funds.
(e)“Non-Performing Asset” means a borrowal account in respect of which interest income or instalment of loan towards repayment of principal amount has remained unrealised for twelve months;
(f)“Standard Asset” means the asset in respect of which no default in repayment of principal or payment of interest has occurred or is perceived and which has neither shown signs of any problem relating to repayment of principal sum or interest nor does it carry more than normal risk attached to the business;
(g)“Sub-Standard Asset” means a borrowal account which is a non-performing asset:

Provided that reschedulement or renegotiation or rephasement of the loan instalment or interest payment shall not change the classification of an asset unless the borrowal account has satisfactorily performed for at least twelve months after such reschedulement or renegotiation or rephasement.

(2) Words and expressions used herein, but not defined in these rules and defined in the Act or in the Companies (Specification of Definitions Details) Rules, 2014 shall have the same meaning as assigned to them in the Act or in the said Rules.

Incorporation and incidental matters.

4. (1) A Nidhi to be incorporated under the Act shall be a public company and shall have a minimum paid up equity share capital of five lakh rupees.

(2) On and after the commencement of the Act, no Nidhi shall issue preference shares.

(3) If preference shares had been issued by a Nidhi before the commencement of this Act, such preference shares shall be redeemed in accordance with the terms of issue of such shares.

(4) Except as provided under the proviso to sub-rule (e) to rule 6, no Nidhi shall have any object in itsMemorandum of Association other than the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit.

(5) Every Company incorporated as a “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name.

Requirements for minimum number of members, net owned fund etc.

5. (1) Every Nidhi shall, within a period of one year from the commencement of these rules, ensure that it has—

(a)not less than two hundred members;
(b)Net Owned Funds of ten lakh rupees or more;
(c)unencumbered term deposits of not less than ten per cent of the outstanding deposits as specified in rule 14; and
(d)ratio of Net Owned Funds to deposits of not more than 1:20.

(2) Within ninety days from the close of the first financial year after its incorporation and where applicable, the second financial year, Nidhi shall file a return of statutory compliances in Form NDH-1 along with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 with the Registrar duly certified by a company secretary in practice or a chartered accountant in practice or a cost accountant in practice.

(3) If a Nidhi is not complying with clause (a) or (d) of sub-rule (1) above, it shall within thirty days from the close of the first financial year, apply to the Regional Director in Form NDH-2 along with fee specified in Companies (Registration Offices and Fees) Rules, 2014 for extension of time and the Regional Director may consider the application and pass orders within thirty days of receipt of the application.

Explanation.—For the purpose of this rule “Regional Director” means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional Director;

(4) If the failure to comply with sub-rule (1) of this rule extends beyond the second financial year, Nidhi shall not accept any further deposits from the commencement of the second financial year till it complies with the provisions contained in sub-rule (1), besides being liable for penal consequences as provided in the Act.

General restrictions or prohibitions.

6. No Nidhi shall—

(a)carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by any body corporate;
(b)issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever;
(c)open any current account with its members;
(d)acquire another company by purchase of securities or control the composition of the Board of Directors of any other company in any manner whatsoever or enter into any arrangement for the change of its management, unless it has passed a special resolution in its general meeting and also obtained the previous approval of the Regional Director having jurisdiction over such Nidhi;
Explanation.—For the purposes of this sub-rule, “control” shall have the same meaning assigned to it inclause (27) of section 2 of the Act;
(e)carry on any business other than the business of borrowing or lending in its own name:
Provided that Nidhis which have adhered to all the provisions of these rules may provide locker facilities on rent to its members subject to the rental income from such facilities not exceeding twenty per cent of the gross income of the Nidhi at any point of time during a financial year.
(f)accept deposits from or lend to any person, other than its members;
(g)pledge any of the assets lodged by its members as security;
(h)take deposits from or lend money to any body corporate;
(i)enter into any partnership arrangement in its borrowing or lending activities;
(j)issue or cause to be issued any advertisement in any form for soliciting deposit:
Provided that private circulation of the details of fixed deposit schemes among the members of theNidhi carrying the words “for private circulation to members only” shall not be considered to be an advertisement for soliciting deposits.
(k)pay any brokerage or incentive for mobilising deposits from members or for deployment of funds or for granting loans.

Share capital and allotment.

7. (1) Every Nidhi shall issue equity shares of the nominal value of not less than ten rupees each:

Provided that this requirement shall not apply to a company referred to in sub-rules (a) and (b) of rule 2.

(2) No service charge shall be levied for issue of shares.

(3) Every Nidhi shall allot to each deposit holder at least a minimum of ten equity shares or shares equivalent to one hundred rupees:

Provided that a savings account holder and a recurring deposit account holder shall hold at least one equity share of rupees ten.

Membership.

8. (1) A Nidhi shall not admit a body corporate or trust as a member.

(2) Except as otherwise permitted under these rules, every Nidhi shall ensure that its membership is not reduced to less than two hundred members at any time.

(3) A minor shall not be admitted as a member of Nidhi :

Provided that deposits may be accepted in the name of a minor, if they are made by the natural or legal guardian who is a member of Nidhi.

Net owned funds.

9. Every Nidhi shall maintain Net Owned Funds (excluding the proceeds of any preference share capital) of not less than ten lakh rupees or such higher amount as the Central Government may specify from time to time.

Branches.

10. (1) A Nidhi may open branches, only if it has earned net profits after tax continuously during the preceding three financial years.

(2) Subject to the provisions contained in sub-rule (1), a Nidhi may open up to three branches within the district.

(3) If a Nidhi proposes to open more than three branches within the district or any branch outside the district, it shall obtain the prior permission of the Regional Director and an intimation is to be given to the Registrar about opening of every branch within thirty days of such opening.

(4) No Nidhi shall open branches or collection centres or offices or deposit centres, or by whatever name called outside the State where its registered office is situated.

(5) No Nidhi shall open branches or collection centres or offices or deposit centres, or by whatever name called unless financial statement and annual return (up to date) are filed with the Registrar.

(6) A Nidhi shall not close any branch unless it—

(a)publishes an advertisement in a newspaper in vernacular language in the place where it carries on business at least thirty days prior to such closure, informing the public about such closure;
(b)fixes a copy of such advertisement or a notice informing such closure of the branch on the notice board of Nidhi for a period of at least thirty days from the date on which advertisement was published underclause (a) ; and
(c)gives an intimation to the Registrar within thirty days of such closure.

Acceptance of deposits by Nidhis.

11. (1) A Nidhi shall not accept deposits exceeding twenty times of its Net Owned Funds (NOF) as per its last audited financial statements.

(2) In the case of companies covered under clauses (a) and (b) of rule 2 and existing on or before 26th July, 2001 and which have accepted deposits in excess of the aforesaid limits, the same shall be restored to the prescribed limit by increasing the Net Owned Funds position or alternatively by reducing the deposit according to the table given below:

TABLE

Ratio of Net Owned Funds to Deposits (as on 31.3.2013)Date by which the company has to achieve prescribed ceiling of 1:20
(a) More than 1:20 but upto 1:35By 31.3.2015
(b) More than 1:35 but upto 1:45By 31.3.2016
(c) More than 1:45By 31.3.2017

(3) The companies which are covered under the Table in sub-rule (2) above shall not accept fresh deposits or renew existing deposits if such acceptance or renewal leads to violation of the prescribed ratio.

(4) The ratio specified in sub-rule (2) above shall also apply to incremental deposits.

Application form for deposit.

12. (1) Every application form for placing a deposit with a Nidhi shall contain the following particulars, namely:—

(a)Name of Nidhi;
(b)Date of incorporation of Nidhi;
(c)The business carried on by Nidhi with details of branches, if any;
(d)Brief particulars of the management of Nidhi (name, addresses and occupation of the directors, including DIN);
(e)Net profits of Nidhi before and after making provision for tax for the preceding three financial years;
(f)Dividend declared by Nidhi during the preceding three financial years;
(g)Mode of repayment of the deposit;
(h)Maturity period of the deposit;
(i)Interest payable on the deposit;
(j)The rate of interest payable to the depositor in case the depositor withdraws the deposit prematurely;
(k)The terms and conditions subject to which the deposit may be accepted or renewed;
(l)A summary of the financials of the company as per the latest two audited financial statements as given below:
(i)Net Owned Funds
(ii)Deposits accepted
(iii)Deposits repaid
(iv)Deposits claimed but remaining unpaid
(v)Loans disbursed against—
(a)immovable property;
(b)deposits; and
(c)gold and jewellery
(vi)Profit before tax
(vii)Provision for tax
(viii)Profit after tax
(ix)Dividend per share
(m)any other special features or terms and conditions subject to which the deposit is accepted or renewed.

(2) The application form shall also contain the following statements, namely:—

(a)in case of non- payment of the deposit or part thereof as per the terms and conditions of such deposit, the depositor may approach the Registrar of companies having jurisdiction over Nidhi;
(b)in case of any deficiency of Nidhi in servicing its depositors, the depositor may approach the National Consumers Disputes Redressal Forum, the State Consumers Disputes Redressal Forum or District Consumers Disputes Redressal Forum, as the case may be, for redressal of his relief;
(c)a declaration by the Board of Directors to the effect that the financial position of Nidhi as disclosed and the representations made in the application form are true and correct and that Nidhi has complied with all the applicable rules;
(d)a statement to the effect that the Central Government does not undertake any responsibility for the financial soundness of Nidhi or for the correctness of any of the statement or the representations made or opinions expressed by Nidhi;
(e)the deposits accepted by Nidhi are not insured and the repayment of deposits is not guaranteed by either the Central Government or the Reserve Bank of India; and
(f)a verification clause by the depositor stating that he had read and understood the financial and other particulars furnished and representations made by Nidhi in his application form and after careful consideration he is making the deposit with Nidhi at his own risk and volition.

(3) Every Nidhi shall obtain proper introduction of new depositors before opening their accounts or accepting their deposits and keep on its record the evidence on which it has relied upon for the purpose of such introduction.

(4) For the purposes of introduction of depositors, a Nidhi shall obtain documentary evidence of the depositor in the form of proof of identity and address as under :

(a) Proof of Identity (any one of the following)

(i)Passport
(ii)Unique Identification Number
(iii)Income-tax PAN card
(iv)Elector Photo Identity Card
(v)Driving licence
(vi)Ration card

(b) Proof of Address (any one of the following)

(i)Passport
(ii)Unique Identification Number
(iii)Elector Photo Identity Card
(iv)Driving licence
(v)Ration card
(vi)Telephone bill
(vii)Bank account statement
(viii)Electricity bill

(documents referred to serial numbers (vi), (vii) and (viii) above shall not be more than two months old)

Deposits.

13. (1) The fixed deposits shall be accepted for a minimum period of six months and a maximum period of sixty months.

(2) Recurring deposits shall be accepted for a minimum period of twelve months and a maximum period of sixty months.

(3) In case of recurring deposits relating to mortgage loans, the maximum period of recurring deposits shall correspond to the repayment period of such loans granted by Nidhi.

(4) The maximum balance in a savings deposit account at any given time qualifying for interest shall not exceed one lakh rupees at any point of time and the rate of interest shall not exceed two per cent above the rate of interest payable on savings bank account by nationalised banks.

(5) A Nidhi may offer interest on fixed and recurring deposits at a rate not exceeding the maximum rate of interest prescribed by the Reserve Bank of India which the Non-Banking Financial Companies can pay on their public deposits.

(6) A fixed deposit account or a recurring deposit account shall be foreclosed by the depositor subject to the following conditions, namely:—

(a)a Nidhi shall not repay any deposit within a period of three months from the date of its acceptance;
(b)where at the request of the depositor, a Nidhi repays any deposit after a period of three months, the depositor shall not be entitled to any interest up to six months from the date of deposit;
(c)where at the request of the depositor, a Nidhi makes repayment of a deposit before the expiry of the period for which such deposit was accepted by Nidhi, the rate of interest payable by Nidhi on such deposit shall be reduced by two per cent from the rate which Nidhi would have ordinarily paid, had the deposit been accepted for the period for which such deposit had run:
Provided that in the event of death of a depositor, the deposit may be repaid prematurely to the surviving depositor or depositors in the case of joint holding with survivor clause, or to the nominee or to legal heir with interest up to the date of repayment at the rate which the company would have ordinarily paid, had such deposit been accepted for the period for which such deposit had run.

Un-encumbered term deposits.

14. Every Nidhi shall invest and continue to keep invested, in unencumbered term deposits with a scheduled commercial bank (other than a co-operative bank or a regional rural bank), or post office deposits in its own name an amount which shall not be less than ten per cent of the deposits outstanding at the close of business on the last working day of the second preceding month:

Provided that in cases of unforeseen commitments, temporary withdrawal may be permitted with the prior approval of the Regional Director for the purpose of repayment to depositors, subject to such conditions and time limit which may be specified by the Regional Director to ensure restoration of the prescribed limit of ten per cent.

Loans.

15. (1) A Nidhi shall provide loans only to its members.

(2) The loans given by a Nidhi to a member shall be subject to the following limits, namely:—

(a)two lakh rupees, where the total amount of deposits of such Nidhi from its members is less than two crore rupees;
(b)seven lakh fifty thousand rupees, where the total amount of deposits of such Nidhi from its members is more than two crore rupees but less than twenty crore rupees;
(c)twelve lakh rupees, where the total amount of deposits of such Nidhi from its members is more than twenty crore rupees but less than fifty crore rupees; and
(d)fifteen lakh rupees, where the total amount of deposits of such Nidhi from its members is more than fifty crore rupees:

Provided that where a Nidhi has not made profits continuously in the three preceding financial years, it shall not make any fresh loans exceeding fifty per cent of the maximum amounts of loans specified in clause (a), (b), (c) or (d).

Provided further that a member shall not be eligible for any further loan if he has borrowed any earlier loan from the Nidhi and has defaulted in repayment of such loan.

(3) For the purposes of sub-rule (2), the amount of deposits shall be calculated on the basis of the last audited annual financial statements.

(4) A Nidhi shall give loans to its members only against the following securities, namely:—

(a)gold, silver and jewellery:
Provided that the repayment period of such loan shall not exceed one year.
(b)immovable property:
Provided that the total loans against immovable property [excluding mortgage loans granted on the security of property by registered mortgage, being a registered mortgage under section 69 of the Transfer of Property Act, 1882 (IV of 1882)] shall not exceed fifty per cent of the overall loan outstanding on the date of approval by the board, the individual loan shall not exceed fifty per cent of the value of property offered as security and the period of repayment of such loan shall not exceed seven years.
(c)fixed deposit receipts, National Savings Certificates, other Government Securities and insurance policies:

Provided that such securities duly discharged shall be pledged with Nidhi and the maturity date of such securities shall not fall beyond the loan period or one year whichever is earlier :

Provided further that in the case of loan against fixed deposits, the period of loan shall not exceed the unexpired period of the fixed deposits.

Rate of interest.

16. The rate of interest to be charged on any loan given by a Nidhi shall not exceed seven and half per cent above the highest rate of interest offered on deposits by Nidhi and shall be calculated on reducing balance method:

Provided that Nidhi shall charge the same rate of interest on the borrowers in respect of the same class of loans and the rates of interest of all classes of loans shall be prominently displayed on the notice board at the registered office and each branch office of Nidhi.

Rules relating to Directors.

17. (1) The Director shall be a member of Nidhi.

(2) The Director of a Nidhi shall hold office for a term up to ten consecutive years on the Board of Nidhi.

(3) The Director shall be eligible for re-appointment only after the expiration of two years of ceasing to be a Director.

(4) Where the tenure of any Director in any case had already been extended by the Central Government, it shall terminate on expiry of such extended tenure.

(5) The person to be appointed as a Director shall comply with the requirements of sub-section (4) of section 152 of the Act and shall not have been disqualified from appointment as provided in section 164 of the Act.

Dividend.

18. A Nidhi shall not declare dividend exceeding twenty five per cent or such higher amount as may be specifically approved by the Regional Director for reasons to be recorded in writing and further subject to the following conditions, namely:—

(a)an equal amount is transferred to General Reserve;
(b)there has been no default in repayment of matured deposits and interest; and
(c)it has complied with all the rules as applicable to Nidhis.

Auditor.

19. (1) No Nidhi shall appoint or re-appoint an individual as auditor for more than one term of five consecutive years.

(2) No Nidhi shall appoint or re-appoint an audit firm as auditor for more than two terms of five consecutive years :

Provided that an auditor (whether an individual or an audit firm) shall be eligible for subsequent appointment after the expiration of two years from the completion of his or its term.

Explanation.—For the purposes of this proviso:

(i)in case of an auditor (whether an individual or audit firm), the period for which he or it has been holding office as auditor prior to the commencement of these rules shall be taken into account in calculating the period of five consecutive years or ten consecutive years, as the case may be;
(ii)appointment includes re-appointment.

Prudential norms.

20. (1) Every Nidhi shall adhere to the prudential norms for revenue recognition and classification of assets in respect of mortgage loans or jewel loans as contained hereunder.

(2) Income including interest or any other charges on non-performing assets shall be recognised only when it is actually realised and any such income recognised before the asset became non-performing and which remains unrealised in a year shall be reversed in the profit and loss account of the immediately succeeding year.

(3)(a) In respect of mortgage loans, the classification of assets and the provisioning required shall be as under:

NATURE OF ASSETPROVISION REQUIRED
Standard AssetNo provision
Sub-standard Asset10% of the aggregate outstanding amount
Doubtful Asset25% of the aggregate outstanding amount
Loss Asset100% of the aggregate outstanding amount:

Provided that a Nidhi may make provision for exceeding the percentage specific herein.

(b) The estimated realisable value of the collateral security to which a Nidhi has valid recourse may be reduced from the aggregate outstanding amount, if the proceedings for the sale of the mortgaged property have been initiated in a court of law within the previous two years of the interest, income or instalment remaining unrealised.

(4) In case of companies which were incorporated on or before 26-7-2001, such companies shall make provisions in respect of loans disbursed and outstanding as on 31-3-2002 for income reversal and non-performing assets as per table given below:

For the year endedExtent of provision
31-03- 2015Un-provided balance on equal basis over the three years as specified in the preceding column.
31-03- 2016
31-03- 2017

(5) (a) The Notes on the financial statements of a year shall disclose—

(i)the total amount of provisions, if any, to be made on account of income reversal and non-performing assets remaining unrealised;
(ii)the cumulative amount provided till the previous year;
(iii)the amount provided in the current year; and
(iv)the balance amount to be provided.

(b) Such disclosure shall continue to be made until the entire amount to be provided has been provided for.

(6) In respect of loans against gold or jewellery—

(a)the aggregate amount of loan outstanding against the security of gold or jewellery shall either be recovered or renewed within three months from the due date of repayment;
(b)if the loan is not recovered or renewed and the security is not sold within the aforesaid period of three months, the company shall make provision in the current year’s financial statements to the extent of unrealised amount or the aggregate outstanding amount of loan including interest as applicable;
(c)no income shall be recognised on such loans outstanding after the expiry of the three months period specified in (a) above or sale of gold or jewellery, whichever is earlier; and
(d)the loan to value ratio shall not exceed 80 per cent.

Explanation.—For the purposes of this rule, the term ‘loan to value ratio’ means the ratio between the amount of loan given and the value of gold or jewellery against which such loan is given.

Filing of half yearly return.

21. Every company covered under rule 2 shall file half yearly return with the Registrar in Form NDH-3 along with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 within thirty days from the conclusion of each half year duly certified by a company secretary in practice or chartered accountant in practice or cost accountant in practice.

Auditor’s certificate.

22. The Auditor of the company shall furnish a certificate every year to the effect that the company has complied with all the provisions contained in the rules and such certificate shall be annexed to the audit report and in case of non-compliance, he shall specifically state the rules which have not been complied with.

Power to enforce compliance.

23. (1) For the purposes of enforcing compliance with these rules, the Registrar of companies may call for such information or returns from Nidhi as he deems necessary and may engage the services of chartered accountants, company secretaries in practice, cost accountants, or any firm thereof from time to time for assisting him in the discharge of his duties.

(2) In respect of any Nidhi which has violated these rules or has failed to function in terms of the Memorandumand Articles of Association, the concerned Regional Director may appoint a Special Officer to take over the management of Nidhi and such Special Officer shall function as per the guidelines given by such Regional Director :

Provided that an opportunity of being heard shall be given to the concerned Nidhi by the Regional Director before appointing any Special Officer.

Penalty for non-compliance.

24. If a company falling under rule 2 contravenes any of the provisions of the rules prescribed herein, the company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees, and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day after the first during which the contravention continues.

CHAPTER XXVII : NATIONAL COMPANY LAW TRIBUNAL AND APPELLATE TRIBUNAL

NATIONAL COMPANY LAW TRIBUNAL (SALARY, ALLOWANCES AND OTHER TERMS AND CONDITIONS OF SERVICE OF PRESIDENT AND OTHER MEMBERS) RULES, 2013

In exercise of the powers conferred by section 469 read with section 414 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules, namely:—

Short title and commencement

1. (1) These rules may be called the National Company Law Tribunal (Salary, Allowances and other Terms and Conditions of Service of President and other Members) Rules, 2013.

(2) They shall come into force on the date of their publication in the Official Gazette.

Definitions

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“President” means the President of the Tribunal appointed under section 408 of the Act;
(c)“Tribunal” means the National Company Law Tribunal constituted under section 408 of the Act;

(2) Words and expressions used in these rules and not defined, but defined in the Act shall have the meanings respectively assigned to them in the Act.

Pay

3. (1) The President shall be entitled to a monthly pay of Rs. 80,000 (fixed) and other allowances as are admissible to a Government Servant in the Apex grade of Rs. 80,000 (fixed).

(2) A Judicial Member shall be paid salary in the pay scale of Rs. 67000-79000 (annual increment at 3%) and other allowances as are admissible to a Government Servant in Higher Administrative Grade of Rs. 67000-79000.

(3) A Technical Member shall be paid salary in the pay scale of Rs. 67000-79000 (annual increment at 3%) and other allowances as are admissible to a Government Servant in Higher Administrative Grade of Rs. 67000-79000.

Provided that neither the salary and allowances nor the other terms and conditions of service of the President and the Members shall be varied to their disadvantage after their appointment:

Provided further that in case a person appointed as the President or a Judicial Member or a Technical Member, as the case may be, is in receipt of any pension, the pay of such person shall be reduced by the gross amount of pension drawn by him.

Pension, Gratuity or Provident Fund

4. (1) In case of a serving judge of a High Court or a person in the service of the Government is appointed to the post of President or Judicial Member or Technical Member, as the case may be, the service rendered in the Tribunal shall count for pension, to be drawn in accordance with the rules of the service to which he belongs, and he shall also be governed by the provisions of the General Provident Fund (Central Services) Rules, 1960.

(2) In all other cases, the Members shall be governed by the provisions of the Contributory Provident Fund (India) Rules, 1962.

(3) Additional pension and gratuity shall not be admissible for service rendered in the Tribunal.

Leave

5. (1) The President and every other Member shall be entitled to thirty days of Earned Leave for every year of service.

(2) The payment of leave salary during leave shall be governed by rule 40 of the Central Civil Services (Leave) Rules, 1972.

(3) The President and every other Member shall be entitled to encashment of fifty per cent of Earned Leave standing to their credit at any time.

Leave Sanctioning Authority

6. In the case of the President, the competent authority to sanction the leave shall be the President of India and in the case of the Members, the President shall be the leave sanctioning authority.

Travelling Allowances

7. (1) The President of the Tribunal while on tour within India or on transfer (including the journey undertaken to join the Tribunal or on the completion of their tenure with the Tribunal to proceed to their home town) shall be entitled to the travelling allowance, daily allowance, transportation of personal effects and other similar matters at the same rates as are applicable to the officers of the Central Government in Apex Grade (Rupees eighty thousand [fixed]), subject to the first proviso to sub-rule (3) of rule 3.

(2) The Members of the Tribunal while on tour within India or on transfer (including the journey undertaken to join the Tribunal or on the completion of their tenure with the Tribunal to proceed to their home town) shall be entitled to the travelling allowance, daily allowance, transportation of personal effects and other similar matters at the same rates as are applicable to the officers of the Central Government in Higher Administrative Grade (Rs. 67000-79000), subject to the first proviso of sub-rule (3) of rule 3.

Official visits abroad

8. (1) Official visits abroad by the President shall be undertaken only in accordance with orders issued by the Central Government and he shall be entitled to draw such allowances in respect of such visits as are applicable to officers of the Central Government in Apex Grade (Rupees eighty thousand-fixed), subject to the first proviso to sub-rule (3) of rule 3.

(2) Official visits abroad by the Members shall be undertaken only in accordance with orders issued by the Central Government and they shall be entitled to draw such allowances in respect of such visits as are applicable to officers of the Central Government in Higher Administrative Grade Rs. 67000-79000, subject to the first proviso to sub-rule (3) of rule 3.

Leave Travel Concession

9. (1) The President of the Tribunal shall be entitled to Leave Travel Concession (LTC) at the same rates as applicable to officers of the Central Government in Apex Grade (Rupees eighty thousand [fixed]), subject to the first proviso to sub-rule (3) of rule 3.

(2) The Members of the Tribunal shall be entitled to Leave Travel Concession (LTC) at the same rates as applicable to officers of the Central Government in Higher Administrative Grade (Rs. 67000-79000), subject to the first proviso to sub-rule (3) of Rule 3.

Facility for Medical Treatment

10. The President and other Members shall be entitled to medical treatment and hospital facilities as provided in the Central Government Health Scheme and a places, where the said Scheme is not in operation, the President and other Members shall be entitled to the facilities as provided in the Central Service (Medical Attendance) Rules, 1944.

Accommodation

11. The President and Members shall have the option of claiming house rent allowance in accordance with the rate prescribed by the Central Government:

Provided that they shall not be eligible for house rent allowance in case they are declared eligible for General Pool Residential Accommodation and occupy such a Government accommodation allotted to them.

Facility of conveyance

12. The President and Members shall be entitled to the facility of staff car for journeys for official and private purposes in accordance with the facilities provided to Government servants in the corresponding pay grade.

Telephone facility, official meetings and entertainment expenses

13. The President and Members shall be eligible for telephone facilities, official meetings and entertainment expenses as admissible to a Group ‘A’ officer of the Central Government drawing an equivalent pay.

Conditions of service of sitting Judge of a High Court appointed as President or Judicial Member

14. Where a sitting judge of a High Court is appointed as the President or a Judicial Member of the Tribunal, as the case may be, the service conditions, unless specifically provided in these rules, as contained in the High Court Judges (Conditions of Service) Act, 1954 and the rules made thereunder shall apply to him.

Applicability of rules

15. (1) Chairman and Members of the Company Law Board, who fulfil the qualifications and requirements provided under the Act for being appointed respectively as the President and Members of the Tribunal shall be so appointed after following the selection procedure for these posts in the manner laid down in section 412 of the Act.

(2) The pay scale referred to in clause (a) of sub-section (3) of section 409 as ‘equivalent’ to the pay scale of Joint Secretary to the Government of India shall mean pay scale of Rs. 37,400-67,000 (Pay Band – 4) Grade Pay Rs. 10,000.

Other Conditions of Service

16. The conditions of service of President or Members in respect of matters for which no provision is made in these rules shall be the same as may, for the time being, be applicable to other employees of the Government of India of a corresponding status.

Oath of office and secrecy

17. (1) Every person appointed as the President or, as the case may be, Member shall, before entering upon his office, make and subscribe an oath of office and secrecy respectively, in Form I and Form II annexed to these rules.

Declaration of financial or other interest

18. Every person, on his appointment as the President or Member, as the case may be, shall give a declaration in Form III annexed to these rules, to the satisfaction of the Central Government, that he does not have any such financial or other interest as is likely to affect prejudicially his functions as President or Member, as the case may be.

Powers to relax

19. The Central Government shall have power to relax any provision of these rules with respect to any class or category of persons.

CHAPTER XXVII : NATIONAL COMPANY LAW TRIBUNAL AND APPELLATE TRIBUNAL

NATIONAL COMPANY LAW APPELLATE TRIBUNAL (SALARIES, ALLOWANCES AND OTHER TERMS AND CONDITIONS OF SERVICE OF THE CHAIRPERSON AND OTHER MEMBERS) RULES, 2014

In exercise of the powers conferred by section 469 read with section 414 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules, namely:—

Short title and commencement

1. (1) These rules may be called the National Company Law Appellate Tribunal (Salaries, Allowances and other terms and conditions of service of the Chairperson and other Members) Rules, 2014.

(2) They shall come into force on the date of their publication in the Official Gazette.

Definitions

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 ( 18 of 2013);
(b)“Appellate Tribunal” means the National Company Law Appellate Tribunal constituted under section 410 of the Act;
(c)“Chairperson” means the Chairperson of the Appellate Tribunal appointed under sub-section (1) of section 412 of the Act;
(d)“Tribunal” means the National Company Law Tribunal constituted under section 408 of the Act;

(2) Words and expressions used in these rules and not defined, but defined in the Act shall have the meanings respectively assigned to them in the Act.

Pay

3. The Chairperson shall be entitled to a monthly pay of Rs. 90,000 (fixed) and such other allowances as are admissible to an officer in the Cabinet Secretary’s Scale of Rs.90,000 (fixed).

(2) A Judicial Member shall be paid salary in the pay scale of Rs. 80,000 (fixed) and such other allowances as are admissible to an officer in the Apex Scale of Rs.80,000 (fixed).

(3) A Technical Member shall be paid salary in the pay scale of Rs. 80,000 (fixed) and other such allowances as are admissible to an officer in the Apex Scale (fixed):

Provided that neither the salary and allowances nor the other terms and conditions of service of the Chairperson, Judicial Member and the Technical Member shall be varied to their disadvantage after their appointment:

Provided further that in case a person appointed as the Chairperson or a Member, as the case may be, is in receipt of any pension, the pay of such person shall be reduced by the gross amount of pension drawn by him.

Pension, Gratuity or Provident Fund

4. (1) In case a serving Judge of the Supreme Court or High Court, a serving Judicial Member of the Tribunal or a person in Government service is appointed to the post of Chairperson or Judicial Member or Technical Member, as the case may be, the service rendered in the Appellate Tribunal shall count for pension, to be drawn in accordance with the rules of the service to which he belongs, and he shall also be governed by the provisions of the General Provident Fund (Central Services) Rules, 1960.

(2) In all other cases, the Members shall be governed by the provisions of the Contributory Provident Fund (India) Rules, 1962.

(3) Additional pension and gratuity shall not be admissible for service rendered in the Appellate Tribunal.

Leave

5. (1) The Chairperson and every other Member shall be entitled to thirty days of Earned Leave for every year of service.

(2) The payment of leave salary during leave shall be governed by rule 40 of the Central Civil Services (Leave) Rules, 1972.

(3) The Chairperson and every other Member shall be entitled to encashment of fifty per cent of Earned Leave standing to their credit at any time.

Leave Sanctioning Authority

6. In the case of the Chairperson, the competent authority to sanction the leave shall be the President of India and in the case of the Members, the Chairperson shall be the leave sanctioning authority.

Travelling Allowances

7. (1) The Chairperson of the Appellate Tribunal while on tour within India or on transfer (including the journey undertaken to join the Tribunal or on the completion of his tenure with the Tribunal to proceed to his home town) shall be entitled to the travelling allowance, daily allowance, transportation of personal effects and other similar matters at the same rates as are admissible to the officer of the Central Government in the equivalent grade or scale, subject to the first proviso to sub-rule (3) of rule 3.

(2) The Member of the Appellate Tribunal while on tour within India or on transfer (including the journey undertaken to join the Appellate Tribunal or on the completion of his tenure with the Appellate Tribunal to proceed to his home town) shall be entitled to the travelling allowance, daily allowance, transportation of personal effects and other similar matters at the same rates as are admissible to the officer of the Central Government in the equivalent grade or scale, subject to the first proviso of sub-rule (3) of rule 3.

Official visits abroad

8. (1) Official visits abroad by the Chairperson shall be undertaken only in accordance with orders issued by the Central Government and he shall be entitled to draw such allowances in respect of such visits as are admissible to the officer of the Central Government in the equivalent grade or scale, subject to the first proviso to sub-rule (3) of rule 3.

(2) Official visits abroad by the Member shall be undertaken only in accordance with orders issued by the Central Government and they shall be entitled to draw such allowances in respect of such visits as are admissible to officer of the Central Government in the equivalent grade or scale, subject to the first proviso to sub-rule (3) of rule 3.

Leave Travel Concession

9. (1) The Chairperson of the Appellate Tribunal shall be entitled to Leave Travel Concession at the same rates as are admissible to an officer of the Central Government in the equivalent pay grade or scale, subject to the first proviso to sub-rule (3) of rule 3.

(2) The Members of the Appellate Tribunal shall be entitled to Leave Travel Concession at the same rates as are applicable to officers of the Central Government in the equivalent grade or scale, subject to the first proviso to sub-rule (3) of rule 3.

Facility for Medical Treatment

10. The Chairperson and other Members shall be entitled to medical treatment and hospital facilities as provided in the Central Government Health Scheme and at places, where the said Scheme is not in operation, the Chairperson and other Members shall be entitled to the facilities as provided in the Central Services (Medical Attendance) Rules, 1944.

Accommodation

11. The Chairperson or the Judicial Member or the Technical Member shall have the option of claiming house rent allowance in accordance with the rates prescribed by the Central Government for Group ‘A’ officers of equivalent pay grade or scale:

Provided that he shall not be eligible for house rent allowance in case he is declared eligible for General Pool Residential Accommodation and occupying such a Government accommodation allotted to him.

Facility of conveyance

12. The Chairperson or the Judicial Member or the Technical Member shall be entitled to the facility of staff car for journeys for official and private purposes in accordance with the facilities provided to Central Government servants in the corresponding pay grade.

Telephone facility, official meetings and entertainment expenses

13. The Chairperson or the Judicial Member and or the Technical Member shall be eligible for telephone facilities, official meetings and entertainment expenses as admissible to a Group ‘A’ officer of the Central Government drawing an equivalent pay.

Conditions of service of sitting Judge of the Supreme Court or a Chief Justice of a High Court or a Judge of a High Court appointed as Chairperson or Judicial Member

14. Where a sitting Judge of the Supreme Court or a Chief Justice of a High Court or a Judge of a High Court or a Judicial Member of the Tribunal, who was a Judge of a High Court before his appointment is appointed as the Chairperson or a Judicial Member of the Appellate Tribunal, the service conditions, unless specifically provided for in these rules, shall be as contained in the Supreme Court Judges (Conditions of Service) Act, 1958, or the High Court Judges (Conditions of Service) Act, 1954, as the case may be, and the rules made thereunder shall apply to him.

Oath of office and secrecy

15. Every person appointed as the Chairperson or a Member, as the case may be, shall, before entering upon his office, make and subscribe an oath of office and secrecy, in Form I and Form II annexed to these rules.

Declaration of financial or other interest

16. Everyperson, on his appointment as the Chairperson or Member, as the case may be, shall give a declaration in Form III annexed to these rules, to the satisfaction of the Central Government, that he does not have any such financial or other interest as is likely to affect prejudicially his functions as Chairperson or Member, as the case may be.

Other Conditions of Service

17. The conditions of service of Members of Appellate Tribunal in respect of matters for which no provision is made in these rules shall be the same as may, for the time being, be applicable to other employees of the Government of India of a corresponding grade or scale.

Power to relax

18. The Central Government shall have power to relax any provision of these rules with respect to any class or category of persons.

CHAPTER XXIX : MISCELLANEOUS

COMPANIES (ADJUDICATION OF PENALTIES) RULES, 2014

In exercise of the powers conferred by section 454, read with section 469 of the Companies Act, 2013, the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called the Companies (Adjudication of Penalties) Rules, 2014.

(2) They shall come into force on the date of their publication in the Official Gazette.

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Annexure” means the Annexure enclosed to these Rules;
(c)“Fees” means fees as prescribed in the Companies (Registration Offices and Fees) Rules, 2014;
(d)“Form” or “e-Form” means a form set forth in Annexure to these rules which shall be used for the matter to which it relates;
(e)“Regional Director” means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional Director;
(f)“section” means section of the Act;

(2) Words and expressions used in these rules but not defined, and defined in the Act or in the Companies (Specification of Definitions Details) Rules, 2014 shall have the meanings respectively assigned to them in the Act or in the said Rules.

Adjudication of penalties.

3. (1) The Central Government may appoint any of its officers, not below the rank of Registrar, as adjudicating officers for adjudging penalty under the provisions of the Act.

(2) Before adjudging penalty, the adjudicating officer shall issue a written notice to the company and to every officer of the company who is in default, to show cause, within such period as may be specified in the notice (not being less than fifteen days and more than forty five days from the date of service thereon), why the inquiry should not be held against him :

Provided that every notice issued under this sub-rule, shall clearly indicate the nature of non-compliance or default under the Act alleged to have been committed or made by such company and officer in default, as the case may be :

Provided further that the adjudicating officer may, for reasons to be recorded in writing, extend the period referred to above by a further period not exceeding fifteen days, if the company or officer (as applicable) satisfies the said officer that it has sufficient cause for not responding to the notice within the stipulated period.

(3) If, after considering the cause, if any, shown by such company or officer, the adjudicating officer is of the opinion that an inquiry should be held, he shall issue a notice fixing a date for the appearance of such company, through its authorised representative, or officer of such company whether personally or through his authorised representative.

(4) On the date fixed for hearing and after giving a reasonable opportunity of being heard to the person(s) concerned, the adjudicating officer may, subject to reasons to be recorded in writing, pass any order as he thinks fit including an order for adjournment of the hearing to a future date.

(5) Every order passed under sub-rule (4), shall be dated and signed by the adjudicating officer.

(6) The adjudicating officer shall send a copy of the order passed by it to the concerned company or officer who is in default and to the Central Government.

(7) While holding an inquiry, the adjudicating officer shall have the following powers, namely:—

(a)to summon and enforce the attendance of any person acquainted with the facts and circumstances of the case;
(b)to order for evidence or to produce any document, which in the opinion of the adjudicating officer, may be useful for or relevant to the subject matter of the inquiry.

(8) If any person fails, neglects or refuses to appear as required under sub-rule (7) before the adjudicating officer, the adjudicating officer may proceed with the inquiry in the absence of such person after recording the reasons for doing so.

(9) While adjudging quantum of penalty, the adjudicating officer shall have due regard to the following factors, namely:—

(a)the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;
(b)the amount of loss caused to an investor or group of investors or creditors as a result of the default;
(c)the repetitive nature of the default.

(10) All sums realised by way of penalties under the Act shall be credited to the Consolidated Fund of India.

Appeal against the order of adjudicating officer.

4. (1) Every appeal against the order of the adjudicating officer shall be filed in writing with the Regional Director having jurisdiction in the matter within a period of sixty days from the date of receipt of the order of adjudicating officer by the aggrieved party, in Form ADJ setting forth the grounds of appeal and shall be accompanied by a certified copy of the order against which the appeal is sought :

Provided that where the party is represented by an authorised representative, a copy of such authorisation in favour of the representative and the written consent thereto by such authorised representative shall also be appended to the appeal :

Provided further that an appeal in Form ADJ shall not seek relief(s) therein against more than one order unless the reliefs prayed for are consequential.

(2) Every appeal filed under this rule shall be accompanied by such fee as provided in the Companies (Registration Offices and Fees) Rules, 2014.

Registration of appeal.

5. (1) On the receipt of an appeal, office of the Regional Director shall endorse the date on such appeal and shall sign such endorsement.

(2) If, on scrutiny, the appeal is found to be in order, it shall be duly registered and given a serial number :

Provided that where the appeal is found to be defective, the Regional Director may allow the appellant such time, not being less than fourteen days following the date of receipt of intimation by the appellant from the Regional Director about the nature of the defects, to rectify the defects and if the appellant fails to rectify such defects within the time period allowed as above, the Regional Director may by order and for reasons to be recorded in writing, decline to register such appeal and communicate such refusal to the appellant within a period of seven days thereof :

Provided further that the Regional Director may, for reasons to be recorded in writing, extend the period referred to in the first proviso above by a further period of fourteen days if an appellant satisfies the Regional Director that the appellant had sufficient cause for not rectifying the defects within the period of fourteen days referred to in the first proviso.

Disposal of appeal by Regional Director.

6. (1) On the admission of the appeal, the Regional Director shall serve a copy of appeal upon the adjudicating officer against whose order the appeal is sought along-with a notice requiring such adjudicating officer to file his reply thereto within such period, not exceeding twenty-one days, as may be stipulated by the Regional Director in the said notice :

Provided that the Regional Director may, for reasons to be recorded in writing, extend the period referred to in sub-rule (1) above for a further period of twenty-one days, if the adjudicating officer satisfies the Regional Director that he had sufficient cause for not being able to file his reply to the appeal within the above-said period of twenty-one days.

(2) A copy of every reply, application or written representation filed by the adjudicating officer before the Regional Director shall be forthwith served on the appellant by the adjudicating officer.

(3) The Regional Director shall notify the parties, the date of hearing of the appeal which shall not be a date earlier than thirty days following the date of such notification for hearing of the appeal.

(4) On the date fixed for hearing the Regional Director may, subject to the reasons to be recorded in writing, pass any order as he thinks fit including an order for adjournment of the hearing to a future date.

(5) In case the appellant or the adjudicating officer does not appear on the date fixed for hearing, the Regional Director may dispose of the appeal ex-parte :

Provided that where the appellant appears afterwards and satisfies the Regional Director that there was sufficient cause for his non-appearance, the Regional Director may make an order setting aside the ex-parteorder and restore the appeal.

(6) Every order passed under this rule shall be dated and signed by the Regional Director.

(7) A certified copy of every order passed by the Regional Director shall be communicated to the adjudicating officer and to the appellant forthwith and to the Central Government.

CHAPTER XXIX : MISCELLANEOUS

COMPANIES (MISCELLANEOUS) RULES, 2014

In exercise of the powers conferred under section 455, sub-section (2) of section 459 and sub-section (1) of section 464, read with section 469 of the Companies Act, 2013, and in supersession of the Companies (Central Government’s) General Rules and Forms, 1956 or any other rules prescribed under the Companies Act, 1956 (1 of 1956) on matters covered under these rules, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely:—

Short title and commencement.

1. (1) These rules may be called the Companies (Miscellaneous) Rules, 2014.

(2) They shall come into force on the date of their publication in the Official Gazette.

Definitions.

2. (1) In these rules, unless the context otherwise requires,—

(a)“Act” means the Companies Act, 2013 (18 of 2013);
(b)“Annexure” means Annexure enclosed to these Rules;
(c)“Fees” means fees as prescribed in the Companies (Registration Offices and Fees) Rules, 2014;
(d)“Form” or “e-Form” means a form set forth in Annexure to these rules which shall be used for the matter to which it relates;
(e)“section” means section of the Act;

(2) Words and expressions used in these rules but not defined, and defined in the Act or in the Company (Specification of Definitions Details) Rules, 2014 shall have the meanings respectively assigned to them in the Act or in the said Rules.

Application for obtaining status of dormant company.

3. For the purposes of sub-section (1) of section 455, a company may make an application in Form MSC-1 along with such fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 to the Registrar for obtaining the status of a Dormant Company in accordance with the provisions of section 455 after passing a special resolution to this effect in the general meeting of the company or after issuing a notice to all the shareholders of the company for this purpose and obtaining consent of at least 3/4th shareholders (in value):

Provided that a company shall be eligible to apply under this rule only, if—

(i)no inspection, inquiry or investigation has been ordered or taken up or carried out against the company;
(ii)no prosecution has been initiated and pending against the company under any law;
(iii)the company is neither having any public deposits which are outstanding nor the company is in default in payment thereof or interest thereon;
(iv)the company is not having any outstanding loan, whether secured or unsecured :
Provided that if there is any outstanding unsecured loan, the company may apply under this rule after obtaining concurrence of the lender and enclosing the same with Form MSC-1;
(v)there is no dispute in the management or ownership of the company and a certificate in this regard is enclosed with Form MSC-1;
(vi)the company does not have any outstanding statutory taxes, dues, duties etc. payable to the Central Government or any State Government or local authorities etc.;
(vii)the company has not defaulted in the payment of workmen’s dues;
(viii)the securities of the company are not listed on any stock exchange within or outside India.

Certificate of status of dormant company.

4. The Registrar shall, after considering the application filed in Form MSC-1, issue a certificate in Form MSC-2allowing the status of a Dormant Company to the applicant.

Register of dormant companies.

5. The Register maintained under the portal maintained by the Ministry of Corporate Affairs on its websitewww.mca.gov.in or any other website notified by the Central Government, shall be the register for dormant companies.

Minimum number of directors for dormant company.

6. A dormant company shall have a minimum number of three directors in case of a public company, two directors in case of a private company and one director in case of a One Person Company :

Provided that the provisions of the Act in relation to the rotation of auditors shall not apply on dormant companies.

Return of dormant companies.

7. A dormant company shall file a “Return of Dormant Company” annually, inter alia, indicating financial position duly audited by a chartered accountant in practice in Form MSC-3 along with such annual fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 within a period of thirty days from the end of each financial year :

Provided that the company shall continue to file the return or returns of allotment and change in directors in the manner and within the time specified in the Act, whenever the company allots any security to any person or there is any change in the directors of the company.

Application for seeking status of an active company.

8. (1) An application, under sub-section (5) of section 455, for obtaining the status of an active company shall be made in Form MSC-4 along with fees as provided in the Companies (Registration Offices and Fees) Rules, 2014 and shall be accompanied by a return in Form MSC-3 in respect of the financial year in which the application for obtaining the status of an active company is being filed :

Provided that the Registrar shall initiate the process of striking off the name of the company if the company remains as a dormant company for a period of consecutive five years.

(2) The Registrar shall, after considering the application filed under sub-rule (1), issue a certificate in FormMSC-5 allowing the status of an active company to the applicant.

(3) Where a dormant company does or omits to do any act mentioned in the Grounds of application in FormMSC-1 submitted to Registrar for obtaining the status of dormant company, affecting its status of dormant company, the directors shall within seven days from such event, file an application, under sub-rule (1) of this rule, for obtaining the status of an active company.

(4) Where the Registrar has reasonable cause to believe that any company registered as ‘dormant company’ under his jurisdiction has been functioning in any manner, directly or indirectly, he may initiate the proceedings for enquiry under section 206 of the Act and if, after giving a reasonable opportunity of being heard to the company in this regard, it is found that the company has actually been functioning, the Registrar may remove the name of such company from register of dormant companies and treat it as an active company.

Fees for application to Central Government.

9. For the purposes of sub-section (2) of section 459, every application which may be, or is required to be, made to the Central Government under any provision of the Act—

(a)in respect of any approval, sanction, consent, confirmation or recognition to be accorded by that Government to, or in relation to, any matter; or
(b)in respect of any direction or exemption to be given or granted by that Government in relation to any matter; or
(c)in respect of any other matter,

shall be accompanied by such fee as provided in the Companies (Registration Offices and Fees) Rules, 2014.

Association or partnership of persons exceeding certain number.

10. No association or partnership shall be formed, consisting of more than fifty persons for the purpose of carrying on any business that has for its objects the acquisition of gain by the association or partnership or by individual members thereof, unless it is registered as a company under the Act or is formed under any other law for the time being in force.

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