CLASS ACTION SUITS


Recent Amendment in the National Company Law Tribunal (Second Amendment) Rules 2019 tries to complete the structure of law governing class action suits. We have much earlier here discussed class action suits under the Companies Act, 2013 and rules made thereunder. Here, we will have an updated post discussion the law as up to date.

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Return of Loans, Deposits and a “not Deposits”


This is the continuation of earlier post written here. Now, the Ministry of Corporate Affairs deployed the updated Form DPT – 3 which is nodal form to file the return of deposits and “not deposits”.

In this post, we will analyse the updated Form DPT – 3 and try to solve the mystery what where and when to report in the return.

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Form MSME – 1


In a post “Return about Payment to MSME Suppliers” earlier here, we discussed two notifications regarding the half-yearly return on the amount of payment due beyond the statutory period of 45 days and the reason of such payment delay. We had a brief discussion in the notified form in that post. We will discuss the electronic version of the Form which is required to be filed now.

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The Active Extension


Among practitioners and followers of corporate law in India, the year 2019 brought a surprise in the form of Form INC – 22A. This was claimed to be a form to identify active companies and checking inactive companies. Unlike earlier attempt aim to boost the image of the country and government, this form lost its shine within few hours of its introduction. Unlike earlier, this form had no mention in government communications of success.

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MANUFACTURING ACTIVITIES IN LLPs


Presently on the website of Ministry of Corporate Affairs, in news and update section following update is displaying prominently –

Manufacturing & allied activities were restricted in LLPs vide OM No. CRC/LLP/e-Forms dated 06.03.2019. This OM invoking the restriction regarding manufacturing & allied activities has been withdrawn with immediate effect.

As this office memorandum is now withdrawn officially we will not refer the same in this post but we will surely discuss the law.

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Director employed elsewhere


A director may be an employee in any organisation and may draw a salary from that other organisation. However, there may be two different situations –

  1. Director is actually an employee of that other organization and nominated by that organisation as a director in this company by virtue of an agreement;
  2. Director is a promoter director of a company but due to some reason join another organisation under a contract of employment. His employer may or may not have knowledge of his directorship in any company.

Indian law does not prohibit outside employment by a director of a company outside its own company. The prospective employer will take a call whether one of its employees should continue to be a director in its own private company.

The prospective employer will pay the employee for his 100% quality working time and 100% quality services. Where prospective employer feels, the employees should not have any other responsibilities except that of employment and of personal life, it may ask the employee to resign from other responsibilities.

The underlying question shall always remain, will that employee be able to honestly devote his time and efforts for its prospective paymaster, the employer.

According to Section 166 of the Companies Act, 2013, a director has certain duties towards the company.

DUTIES OF DIRECTORS (SECTION 166):

  1. A director of a company shall act in accordance with the articles of the company.
  2. A director of a company shall act in good faith to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of the environment.
  3. A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment.
  4. A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.
  5. A director of a company shall not make or attempt to make any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain to the company.
  6. A director of a company shall not assign his office and any assignment so made shall be void.

If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.

Where a director took employment outside the company, he needs to be careful in the performance of his duties towards the company. He needs to answer the following question to himself:

a. can he exercise his independent judgement in the decision making the process of the company?

b. is there any conflict of interest?

If yes, I do not find any restriction on his gainful employment.

However, a company may by way of Articles of Association restrict its directors from outside employment.

However, one should not sail in two boats unless both boats are compatible.

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Corporate Law – Post Election


Unless a general election is crucial there is no purpose to conduct such a huge exercise. The best part of democracy is to give the opportunity for new ideas. Without going to any political prediction we will discuss possible post-election scenario after 23rd May 2019. This may help us to be prepared for the volatility of corporate law in India.

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