Amendment in Management and Administration Rules

Ministry of Corporate Affairs notified on 23^rd September 2016 the Companies (Management and Administration) Amendment Rules, 2016 amending the Companies (Management and Administration) Rules, 2013 with effect from that date.

Register of Member

Rule 3 of the Companies (Management and Administration) Rules, 2014 require that every company limited by shares shall, from the date of its registration, maintain a register of its members in Form MGT – 1 and every company not having share capital, the register of members shall contain certain in respect of each member.

Before present amendment as discussed earlier here, in case of existing companies as on date of commencement of these Rules (1^st April 2014) had time of 6 month (30^th September 2014) for compilation of information as per these rules. [Proviso to sub – rule (1) and sub – rule (2) before present amendment]. Legally, all companies existing on 1^st April 2014 should have complied with this proviso. However, many companies have not shifted their existing registered of members to new register as per new legal format.

Now, a new proviso substitutes the existing proviso to sub – rule (1) and sub – rule (2). New proviso read –

“In the case of a company existing on the commencement of the Act, the particulars as available in the register of members maintained under the Companies Act, 1956 shall be transferred to the new register of members in Form No.MGT-1 and in case additional information, required as per provisions of the Act and these rules, is provided by the members, such information may also be added in the register as and when provided.”

Essence of new proviso is –

• Companies need to transfer existing registers as on 1^st April 2014 to new register in Form MGT – 1.
• In case, some information is not provided by member, which may be required to be added as per new format of register may be added when the member provide it to the company.

First part of this proviso seems strict as it requires immediate transfer of details in existing register of member to new register. Second part of this proviso is a relief as if some information which is not with company, may be added to the register when such information received by the company. This relief does not have any time limit.

Beneficial Interest

Before this amendment, Rule 9 of the Companies (Management and Administration) Rules, 2014 as discussed earlier here require to file Form MGT – 4 and MGT – 5 in duplicate. Now, Ministry feels that there is no requirement to have these forms in duplicate. Hence, words “in duplicate” deleted in sub – rule (1) and sub – rule (2).

Change in shareholding positions

Before this amendment as discussed earlier here, Rule 13 of the Companies (Management and Administration) Rules, 2013 read as under –

“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 percent 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 the expression “change” means increase or decrease by two percent or more in the shareholding of each of the promoters and each of the top ten shareholders of the company.”

Now, this rule has been substituted by following rule –

“Every listed company shall file with the Registrar, a return in Form No MGT – 10, with respect to changes in the shareholding position of promoters and top ten shareholders of the company, in each case, representing increase or decrease by two per cent or more of the paid-up share capital of the company, within fifteen days of such change.”

The effective change is – now, change shall be calculated in respect of paid –up share capital of the company not in respect of share – holding of concern person in the company.

Requisitionist extra – ordinary general meeting

After present amendment, according to explanation to sub – rule (2) of rule 17 of the Companies (Management and Administration) Rules, 2013 it is here by clarified that requistionists 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 on any day except national holiday.

We have discussed provision before amendment earlier here. Now, extra – ordinary general meeting called by requisitionists may be convened on any day except national holidays.

E – Voting

Ministry of corporate Affairs has earlier in March 2015 substituted Rule 20 of the Companies (Management and Administration) Rules, 2014 which deals with electronic voting and discussed earlier here.

Sub – rule (2) of Rule 20 of the Companies (Management and Administration) Rules, 2014 as introduced in March 2015 read as under –

“Every company other than a company referred to in Chapter XB or Chapter XC of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 having its equity shares listed on a recognised stock exchange or a company having not less than one thousand members, shall provide to its members facility to exercise their right to vote on resolutions proposed to be considered at general meetings by electronic means.”

Now, this sub – rule is being substituted as under –

“(2) Every company which has listed its equity shares on a recognised stock exchange and every company having not less than one thousand members shall provide to its members facility to exercise their right to vote on resolutions proposed to be considered at a general meeting by electronic means:

Provided that a Nidhi, or an enterprise or institutional investor referred to in Chapter XB or Chapter XC of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 is not required to provide the facility to vote by electronic means:

Explanation.- For the purpose of this sub-rule, “Nidhi” means a company which has been incorporated as a Nidhi with 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, and which complies with such rules as are prescribed by the Central Government for regulation of such class of companies.”

There is no change in applicability of rule 20, even after this substitution. Following companies SHALL provide right to vote on resolution AT general meeting BY electronic means –

• Every company with equity share listed, and
• Every company with not less than 1,000 members.

Exception from applicability

According to proviso to sub – rule (2) of rule 20 of the companies (Management and Administration) Rules, 2014 one category is added to existing exceptions –

• Nidhi,
• an enterprise or institutional investor referred to in Chapter XB or Chapter XC of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009

Postal Ballot Procedure

Passing of resolution

Before present amendment, sub – rule (7) of rule 22 of the Companies (Management and Administration) Rules, 2014 provides for passing of resolution by postal ballot with requisite majority as mentioned in relevant provision. This was need less duplication of provision of law enacted under sub – section (2) of section 110 of the Companies Act, 2013. Hence, these amendment rules deleted this sub – section.

Date of passing

Before present amendment, sub – rule (14) of rule 22 of the Companies (Management and Administration) Rules, 2014 provides for date of passing of resolution by postal ballot as date of relevant general meeting.  This was need less duplication of provision of law enacted under sub – section (2) of section 110 of the Companies Act, 2013. Hence, these amendment rules deleted this sub – section.

For reference, sub – section (2) of section 110 as discussed earlier here, read as under –

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

Place for minute books

This is very interesting change for corporate compliance officers sitting in corporate offices and not in registered offices.

Clause (e) of sub – rule (1) of rule 25 of the Companies (Management and Administration) Rules, 2014 now amended in following manner by deletion of few words –

“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.”

Now, no company can have minutes book at any place other than registered office of the company. I welcome this change as this will improve corporate governance.

Form MGT – 6

New form MGT – 6 substitutes earlier forms by these amendment rules. The Form Return to the Registrar in respect of declaration under section 89 received by the company. We have earlier discussed here original form.