Curious case of Rule 20 of Management and Administration Rules

This blog post has a poll on a question – Whether Explanations to Rule 20, placed just after sub – Rule (2) are still part of Rule 20? Read and take part in the poll.

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AishMGhrana – Law Governance Responsibility

Dear readers,

Happy New Year 2019!

Year-end is the time to look back and to be happy from your achievement and learn from your mistakes. We always motivate and improve ourselves with this happiness and learning.


1st Jan 2019: Featured post on IndiBlogger, the biggest community of Indian Bloggers

The blog “AishMGhrana – Law Governance Responsibility” regularly put here its annual reports for public information and sharing our happiness. Our readers are our assets. We are thankful to every reader for the long association since March 2011 and we seek your continuous blessing and patronage.

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The blog was adjudged as one of the best blogs in India by in category “law” first time in 2013 and it continues to hold this position. Indian Blog critics listed this blog among best blogs on Corporate Affairs for years 2014, 2015, 2016, 2017 and 2018. The Feedspot lists this blog among “Top 100 Legal Blogs worldwide Every Lawyer and Law Student Must Follow”. This blog is among top 30 blogs on this list of the Feedspot. The Feedspost also lists this blog among “Top 40 Indian Legal Blogs and websites to Follow in 2019” where it is among top 15 blogs.

The blog got about 3.97 lakh page views by 2.69 lakhs unique visitors in the year 2018. During the year, the blog posted 61 posts. The blog now hosts total 689 blog posts and completed 20.97 lakh page-views and 13.60 lakh, unique visitors.

Most of our readers are resident of India and others are from all territories worldwide. Other than India; United States, Canada, Singapore, Malaysia, United Kingdom, Pakistan, South Africa, Kenya and Hong Kong SAR China was important territories with about 1,000 yearly views in the year 2018.

Now 948 committed readers (against 845 last year) subscribed the blog to their email to get instant updates. You may also join mail subscription. 165 fellow blogger – readers (against 144 last year) read the blog on WordPress reader. The blog has 8,620 amazing fans and committed readers through various medium.

Most of our readers landed here on the blog from Search engines. Few others were referred by Mobile apps, Social Media and friends. This year views using mobile phone increased sharply to more than 7,000.

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On-demand, Index of Companies Law Posts as updated at the closing of 31st December 2018 is uploaded here: AishMGhrana INDEX 2019

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Thank you,

Yours Sincerely,

Aishwarya Mohan Gahrana
B.Sc., LL.B., A.I.I.I., F.C.S
Company Secretary and Insolvency Professional
Aishwarya M Gahrana & Associates, New Delhi
WhatsApp: +91 98689 69599
Corporate Law Blog: https://AishMGhrana.Me AishMGhrana Law Governance Responsibility
Personal Blog: गहराना – विचार वेदना की गहराई

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Financial Year for a company

Law stated in this post is as on 20th December 2018.

Financial Year reflects the reporting period for the purpose of financial and non-financial reporting by a company to its stakeholders including government authorities. Since the financial year of the Government of India is 1st April to 31st March as per the British system. The Companies Act, 2013 aligned financial year for companies registered in India to that of the government. There are certain exemptions to have a different period for the financial year. In this post we will discuss the financial year in light of the companies (Amendment) Ordinance, 2018 read with the companies (Incorporation) Fourth Amendment Rules, 2018 and Notification S.O. 6225 (E) dated 18th December 2018.

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The Government of India promulgated a temporary law called the Companies (Amendment) ordinance 2018 on 2nd November 2018 to by parachute landing of few more reform measure. Constitution of India mandate that Government needs to get it approved by Parliament within 6 months.

Readers may read this post as a law applicable with effect from 2nd November 2018 till passing a law by the Parliament, a bill for which was introduced before Loksabha on 20th December 2018. These provisions may continue in force after parliamentary approval. In this post, we will discuss, the reintroduction of Commencement of Business.

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My fellow members of the Institute of Company Secretaries of India (ICSI) may be going to a booth for voting while reading this post. Similarly, members of the Institute of Chartered Accountants of India (ICAI) just concluded their voting last week. These two elections are crucial for the future for these two eminent professions in India, which impact most on financial and non-financial reporting, disclosures and transparency in the working of Corporate India.  Admit or not, these two institutes are facing a crucial issue of survival.

National Financial Reporting Authority – NFRA is already here to oversee accounting standards, auditing standards and quality of services provided by Chartered Accountants. The law establishing the National Financial Reporting Authority – NFRA was incorporate in the statute by Man Mohan Singh Government. Soon thereafter, Chartered Accountants communities made its hue and cry about this law.  There was news of some success for them. Soon after demonetization, Prime Minister Narendra Modi raised a question on quality of services, ethics and values of Chartered Accountants in a much-hyped program organized by ICAI itself. Demonetization failure made it clear that Modi Government will enforce provisions given in the statute for the establishment of NFRA. Finally, it is enforced recently in a slight tone down version. This tone down is, unfortunately, not a face-saving for the Institute of Chartered Accountants of India. There is a reasonable apprehension that, irrespective of the party in power, there may be some efforts to extend the application of these provisions to other auditors like company secretaries. Soon to be elected councils of both institutes will certainly draw a plan to take on such an eventuality.

The second challenge for government and to some extent for these self-regulatory statutory institutes is to create completion in regulations and quality standards. The Insolvency and Bankruptcy Code, 2016 created a super insolvency regulator the Insolvency and Bankruptcy Board of India with three professional regulators competing with each other. There are suggestions to create such competing professional regulators for auditing bodies – Institute of Chartered Accountants of India, Institute of Cost Accountants of India and Institute of Company Secretaries of India. Will NFRA be the super audit regulator or these three professional bodies be super-regulator for their specific domain? How will they deal with the challenge? Do their members care?

Another challenge is a proposal for a council with representation from all stakeholders (appointed by Government not just elected representatives of regulated professionals). Recently, the Medical Council of India saw drastic changes. Unfortunately, all self-regulatory statutory bodies BCI, MCI, ICAI, ICAI (CMA), ICSI and others have a poor record for their professional duty to regulate their respective profession. Their image is not of statutory regulatory bodies but of a trade union. This is at sharp contrast with other statutory regulatory bodies like Securities and Exchange Board of India (SEBI) which regulates brokers, advisors and many other market professionals; Insurance Regulatory and Development Authority (IRDA) which regulates Actuaries, Undertakers and other insurance professionals; and Reserve Bank of India (RBI) which regulators bankers and other financial advisors. The difference lies in their top management – their council or governing board. Will self-regulatory statutory bodies like ICAI and ICSI develop themselves as true professional regulators or be remain downgraded to be a trade union?

Recently, we saw these self-regulatory statutory bodies took advice from big and powerful advisory firms and companies. Some of these firms and companies have a multinational and national presence. Unfortunately, their powerhouses directly and indirectly influence councils of these self regulatory statutory bodies. This need urgent attention and introduction of organizational governance akin to corporate governance and independency norms.

Our major challenges are from inside but one growing challenge is to regulate multinational firms coming to India. India cannot stop them from coming under WTO regulation. We have one clue to govern them from IBBI regulations. We can ask foreign professional to be part of some firms which are governed under Indian regulations. I should clearly say Big – 4 should be governed by these self regulatory statutory bodies. If not, these self regulatory statutory bodies may be scrapped, sooner than later.

Is India prepared?

Starting of a company without capital

This was an interesting question which I received on Quora here. How can I start a company with no capital? We will have a detailed discussion here.

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National Financial Reporting Authority (NFRA) and its Powers

Section 132 of the Companies Act, 2013 is the point of debate and hope for corporate governance. It paves way for constitution of National Financial Reporting Authority – a super-regulator for statutory auditors – Chartered Accountants. Optimists see it as predecessor of a future super-regulator for self regulatory statutory professional organizations – Institute of Chartered Accountants of India regulating chartered accountants and statutory auditors, Institute of Cost Accountants of India (earlier Institute of Cost and Works Accountants of India) regulating cost and management accountants and cost auditors, and Institute of Company Secretaries of India regulating company secretaries and secretarial auditors. We earlier discussed the provision of Section 132 earlier here.

In this post, we will discuss Section 132 and the National Financial Reporting Authority Rules, 2018 as on 13th November 2018.

In an earlier post here, we discussed Duties of NFRA under Section 132 and the National Financial Reporting Authority Rules, 2018 as on 13th November 2018. In this post, we will discuss powers of NFRA to investigate and disciplinary proceeding as on 13th November 2018.

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