Alerts & Updates 30th Oct 2023
The Ministry of Corporate Affairs (MCA) has amended certain rules under the Companies Act, 2013 (CA2013). Key changes introduced by amendments are
A. In a much-awaited move, MCA has made it mandatory for private companies to dematerialise their securities and has given a window within which these shares have to be dematerialised. This is on the lines of earlier mandate for public companies to have their securities dematerialised. MCA has also directed public companies to convert all existing warrants (issued prior CA2013) into equity shares ;
B. MCA has directed companies to designate an officer who will be responsible for furnishing, and extending co-operation for providing, information to ROC / any other authorised officer with respect to beneficial interest in shares of the company;
C. Allowing the shifting of the new registered office of a company taken over under Insolvency Bankruptcy Code, 2016 (IBC).
The above changes have been analysed below:
| Subject | Amendment |
| Mandatory dematerisation of shares for private companies |
Time period: A private company, which as on last day of a financial year, ending on or after March 31, 2023, is not a small company as per audited financial statements for such financial year, shall, within 18 (eighteen) months of closure of such financial year, comply with the provisions of this rule. Every private company referred to above making any offer for issue of any securities or buyback of securities or issue of bonus shares or rights offer, after the date when it is required to comply with this rule, shall ensure that before making such offer, entire holding of securities of its promoters, directors, key managerial personnel has been dematerialised in accordance with the provisions of the Depositories Act, and regulations made thereunder.
The provisions of Rule 9A(4) to 9A(10) for unlisted companies shall, mutatis mutandis, apply to the dematerialisation of securities under this rule. These provisions deal with the requirements and procedure under the Depositories Act. The provisions of this rule shall not apply in case of a Government company. |
| Surrender and conversion of share warrants for public companies | The public companies which issued share warrants prior to commencement of CA2013 and not converted them into shares-
In case any bearer of share warrant does not surrender the share warrants within the period referred to above, the company shall convert such share warrants into dematerialised form and transfer the same to the Investor Education and Protection Fund established under Section 125 of CA2013. |
The mandatory dematerisation of shares of the private company shall minimise the risk and will lead to faster transfer and crediting of new shares. Additionally, it shall curb the companies’ expense of printing and distribution of physical certificates, and also save stamp duty.
| Subject | Amendment |
| Designation of a person for fulfilling the responsibilities with respect to beneficial interest in shares of the company | Every company shall designate a person who shall be responsible for furnishing, and extending co-operation for providing, information to the Registrar or any other authorised officer with respect to beneficial interest in shares of the company.
Every company shall inform the details of the designated person in annual return. If the company changes the designated person at any time, it shall intimate the same to the Registrar in e-form GNL-2 specified under the Companies (Registration Offices and Fees) Rules, 2014. |
Such designation of responsibilities on the persons above will ensure timely information and intimations to the ROC when declarations of beneficial interest of shares are received by the Company.
MCA has issued an amendment to the Companies (Incorporation) Rules, 2014 as a result of which, change of registered offices of companies whose management is taken over under Section 31 of IBC has been made easier. As per the prior norms, shifting of registered office was not allowed if any inquiry, inspection or investigation has been initiated against the company or any prosecution is pending against the company under CA2013. However, as per the amendment, where the management of the company has been taken over by new management under a resolution plan approved under Section 31 of IBC and no appeal against the resolution plan is pending in any Court or Tribunal and no inquiry, inspection, investigation is pending or initiated after the approval of the said resolution plan, the shifting of the registered office may be allowed.
The above amendments have been made vide the Companies (Incorporation) Third Amendment Rules, 2023 dated October 20, 2023 (available here) and is effective from October 21, 2023.
Such relaxation will help new management to easily change office of companies under IBC.
We trust you will find this an interesting read. For any queries or comments on this update, please feel free to contact us at insights@elp-in.com or write to our authors:
Manendra Singh, Partner – Email – ManendraSingh@elp-in.com ;
Ambareen Khatri, Associate – Email – AmbareenKhatri@elp-in.com
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