Chapter 17 Anti-Corruption and Anti-Bribery Laws in India – CS Professional Governance Risk Management Compliances and Ethics Notes is designed strictly as per the latest syllabus and exam pattern.
Anti-Corruption and Anti-Bribery Laws in India – Governance, Risk Management, Compliances and Ethics Study Material
Descriptive Questions
Question 1.
Discuss in brief the composition of Lokpal and its powers. (June 2019, 5 marks)
Answer:
Composition of Lokpal: Lokpal is a statutory, multi-member body which has no constitutional backing. It consists of one Chairperson and a maximum of 8 members.
Chairperson: A person becomes eligible for the appointment as Chairperson of Lokpal if he is a former Chief Justice of India, a former – member of Supreme Court or an eminent person with impeccable integrity and outstanding ability. Additionally, he should have adequate knowledge and 25 years of experience in the matters of the anti-corruption policy, finance, vigilance, law and management, and public administration.
Members: Out of 8 permissible members, 50% are from the judiciary. Rest 50% of members are from OBC/SC/ST/women and minorities. Judicial members should either be a former Judge of Supreme Court or a former Chief Justice of a High Court. In the case of non-judicial members, they should be eminent persons with impeccable integrity and outstanding ability in their chosen professional areas. They should have at least of 25 years of experience in matters relating to anti-corruption policy, vigilance, public administration, vigilance, law, management, and finance.
Powers of Lokpal:
Its inquiry wing has the power to search and seize objects both movable and immovable objects and make reports based on them. These reports would be taken up by the 3-member Lokpal benches for further scrutiny. The benches would give the opportunities for the allegedly corrupt officers to say in their defense. After this, the benches would undertake any of the following alternatives:
- If the officers are found guilty, the benches would grant their sanction to the prosecution wing or CBI to file charge sheets against them. The benches can also direct the concerned government departments to start proceedings against them.
- If the officers are found innocent, the benches would direct the filing of the closure of case reports before the Special Court.
Question 2.
Describe the following terms:
(i) “Foreign Public Official” as per ICSI Anti-Bribery Code
(ii) Disciplinary Mechanism” under ICSI Anti-Bribery Code (Dec 2019, 5 marks each)
Answer:
(i) Foreign public official: it means any person holding a legislative, executive, administrative or judicial office of a foreign country, whether appointed or elected, whether permanent or temporary, whether paid or’ unpaid and includes a person who performs a public function or provides service for a foreign country.
(ii) Disciplinary Mechanism: As per clause 9 ‘Sanctions for Non-compliance’ of ICSI Anti Bribery Code any non-compliance of the Code is subject to disciplinary mechanism. The company shall set up disciplinary mechanism as approved by its Board, for non-compliance of any part of the Corporate Anti- Bribery Code.
The disciplinary mechanism shall include:
- Nature of offence
- Penalty of the office
- Competent Authority
Question 3.
Define the following terms:
(i) “Undue Advantage” as per Prevention of Corruption Act, 1988 (Aug 2021, 1 mark)
(ii) “Bribery” under ICSf Anti Bribery Code (Aug 2021, 1 mark)
(iii) Central Vigilance Commission. (Aug 2021, 1 mark)
Answer:
(i) “Undue Advantage” as per Prevention of Corruption Act, 1988:
In terms of Section 2(d), “Undue advantage” means any gratification whatever, other than legal remuneration.
Explanation: For the purposes of this clause,
(a) the word “gratification” is not limited to pecuniary gratifications or to gratifications estimable in money;
(b) the expression “legal remuneration” is not restricted to remuneration paid to a public servant, but includes all remuneration which he is permitted by the Government or the organisation, which he serves, to receive.
(ii) “Bribery” under ICSI Anti Bribery Code:
‘Bribery’ includes giving or receiving bribe and third party gratification. The act of giving bribe is when committed intentionally in the course of economic, financial or commercial activities and when it is established that there is a promise, offering or giving, directly or indirectly, of an undue advantage to any person who directs or works, in any capacity, for a commercial entity, for the person himself or for another person, in order that he in breach of his duties, act or refrain from acting.
(iii) Central Vigilance Commission:
The Central Vigilance Commission (CVC) is the body constituted by the Government in the year 1964 on the proposal of the Santharam Committee on the Prevention of Corruption. The body was established with an intention to check corruption in the Government departments. The Commission is an independent statutory body exempted from the authority of the executive. The CVC attained statutory recognition by an ordinance of 1998 and in September 12, 2003 the ordinance was replaced by The Central Vigilance Commission Act enacted by the Legislative Department under the Ministry of Law and Justice. The main purpose of the Act was to establish the Central Vigilance Commission to investigate the offences punishable under the Prevention of Corruption Act, 1988 by the public servants working under the Central Government, Corporations constituted under the Act of Parliament, Government companies, and local bodies owned and managed by the Centre.
Question 4.
“The Prevention of Corruption Act, 1988 enacted to combat corruption in public sector and not in the private sector businesses of India.” Do you agree with the statement ? Justify your answer with the help of provided provision in the Prevention of Corruption Act, 1988. (Dec 2021, 5 marks)
Answer:
The Prevention of Corruption Act, 1988 (PCA) criminalises the acceptance of gratification (pecuniary or otherwise) other than the acceptance of legal remuneration by public servants which is paid by their employers in connection with the performance of their duties. Aiding and abetting the commission of bribery is also an offence, such that any person, who bribes or attempts to bribe a public servant or acts as a middleman for such bribing may also be held liable. Further, the PCA creates an adverse presumption if a public servant’s assets are disproportionate in value to his or her income and cannot be satisfactorily accounted for.
The provisions of the PCA apply regardless of the location or jurisdiction of the commission of an offence, as long as the same is committed by a ‘public servant’ as defined under it. Judicial decisions have also interpreted the term ‘public servant’ in the PCA to include a wide variety of persons, such as bank employees in both private and government owned banks.
The PCA deals only with bribery of public servants. It does not extend to bribery or corruption in the private sector, i.e. where a public servant is not involved. That said, a private person/entity will be liable for inducing a public servant to commit an act that is prohibited by the PCA, by corrupt or illegal means or by exercising personal influence.
Who is Public Servant [Section 2(c)]:
“Public servant” means –
1. any person in the service or pay of the Government or remunerated by the Government by fees or commission for the performance of any public duty; Public Duty has been defined by Section 2(b) of the Act, which means a duty in the discharge of which the State, the public or the community at large has an interest.
2. any person in the service or pay of a local authority;
3. any person in the service or pay of a corporation established by or under a Central, Provincial or State Act, or an authority or a body owned or controlled or aided by the Government or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956);
4. any Judge, including any person empowered by law to discharge, whether by himself or as a member of any body of persons, any adjudicatory functions;
5. any person authorised by a court of justice to perform any duty, in ‘ connection with the administration of justice, including a liquidator,
receiver or commissioner appointed by such court;
6. any arbitrator or other person to whom any cause or matter has been referred for decision or report by a court of justice or by a competent public authority;
7. any person who holds an office by virtue of which he is empowered to prepare, publish, maintain or revise an electoral roll or to conduct an election or part of an election;
8. any person who holds an office by virtue of which he is authorised or required to perform any public duty;
9. any person who is the president, secretary or other office-bearer of a registered co-operative society engaged in agriculture, industry, trade or banking, receiving or having received any financial aid from the Central Government or a State Government or from any corporation established by or under a Central, Provincial or State Act, or any authority or body owned or controlled or aided by the Government or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956);
10. any person who is a chairman, member or employee of any Service Commission or Board, by whatever name called, or a member of any selection committee appointed by such Commission or Board for the conduct of any examination or making any selection on behalf of such Commission or Board;
11. any person who is a Vice-Chancellor or member of any governing body, professor, reader, lecturer or any other teacher or employee, by whatever designation called,of any University and any person whose services have been availed of by a University or any other public authority in connection with holding or conducting examinations;
12. any person who is an office-bearer or an employee of an educational, scientific, social, cultural or other institution, in whatever manner established, receiving or having received any financial assistance from the Central Government or any State Government, or local or other public authority.
Question 5.
Write a short note on the following:
1. Foreign Corrupt Practices Act (FCPA)
2. Central Vigilance Commission (CVC)
3. Unlawful Activities (Prevention) Act, 1967
Answer:
1. Foreign Corrupt Practices Act (FCPA): The Foreign Corrupt Practices Act (FCPA), enacted in 1977, generally prohibits the payment of bribes to foreign officials to assist in obtaining or retaining business. The FCPA can apply to prohibited conduct anywhere in the world and extends to publicly traded companies and their officers, directors, employees, stockholders, and agents. Agents can include third party agents, consultants, distributors, joint-venture partners, and others.
2. Central Vigilance Commission (CVC): The Central Vigilance Commission (CVC) is the body constituted by the Government in the year 1964 on the proposal of the Santharam Committee on the Prevention of Corruption. The body was established with an intention to check corruption in the Government departments. The Commission is an independent statutory body exempted from the authority of the executive. The CVC attained statutory recognition by an ordinance of 1998 and in September 12, 2003 the ordinance was replaced by The Central Vigilance Commission Act enacted by the Legislative Department under the Ministry of Law and Justice. The main purpose of the Act was to establish the Central Vigilance Commission to investigate the offences punishable underthe Prevention of Corruption Act, 1988 by the public servants working underthe Central Government, Corporations constituted under the Act of Parliament, Government companies, and local bodies owned and managed by the Centre.
3. Unlawful Activities (Prevention) Act, 1967: The Act being the Central Government’s enactment was provided with the short title as ‘the Unlawful Activities (Prevention) Act, 1967’ (Act no. 37 of 1967). The same was enacted to make provisions as to more effective prevention of Individual’s and associations’ certain unlawful activities. The Act was amended by the Unlawful Activities (Prevention) Amendment Act, 2004 and also the Amending Act of 2008 for adding in its long title, the object of dealing with the Terrorist Activities. The said amendments were made in pursuance with the Resolutions of the Security Council of the United Nations requiring all the States to take measures and actions against terrorism. The provisions of the Act extended to the whole of India. So far as the applicability of the provisions of the Act to persons are concerned, the section 1 itself says that all persons who commits any act or omission which is contrary to the provisions of this Act, should be held guilty in India, and be punished under this Act. Even commission of such acts or omission contrary to the provisions of this Act out side India, is also to be treated, as the same has been committed in India.
Question 6.
What is the scope of Anti Bribery code as applicable by the ICSI?
Answer:
Scope of the Code shall be applicable to the company and its
- Board of Directors,
- Employees (full time or part-time or employed through any third party contract),
- Agents, Associates, Consultants, Advisors, Representatives and Intermediaries, and
- Contractors, Sub-contractors and Suppliers of goods and/or services Space t0 write important points for revision
Question 7.
What is the composition of the Lokpal?
Answer:
As per the law, Lokpal is a statutory, multi-member body which has no 1 constitutional backing. It consists of one Chairperson and a maximum of 8 members. The Members of Parliament, Members of State Legislative Assembly, Members of Panchayat and Municipality, persons convicted of any offence, politicians, people who are removed from the public services due to their inappropriate actions, persons holding any office of trust or business organization are not eligible to hold the coveted post of Chairperson in Lokpal.
Question 8.
Discuss in brief the powers of the Lokpal.
Answer:
Its inquiry wing has the power to search and seize objects – both movable and immovable objects – and make reports based on them. These reports would be taken up by the 3-member Lokpal benches for further scrutiny. The benches would give the opportunities for the allegedly corrupt officers to say in their defense. After this, the benches would undertake any of the following alternatives.
1. If the officers are found guilty, the benches would grant their sanction to the prosecution wing or CBI to file charge sheets against- them. The benches can also direct the concerned government departments to start proceedings against them.
2. If the officers are found innocent, the benches would direct the filing of the closure of case reports before the Special Court. Now, the benches would proceed against the complainants for filing false complaints.
COVID-19 Regulatory Updates
General Circular No. 20/2020
F. No. 2/4/2020-CL-V
Government of India
Ministry of Corporate Affairs
5th Floor, ‘A’ Wing, Shastri Bhawan,
Dr. R. P. Road, New Delhi-110001
Dated: 5th May, 2020
To
All Regional Directors,
All Registrar of Companies
All Stakeholders
Subject: Clarification on holding of annual general meeting (AGM) through video conferencing (VC) or other audio visual means (OAVM)
Sir/Madam,
Several representations have been received in the Ministry for providing relaxations in the provisions of Companies Act, 2013 (the Act) or rules made thereunder to allow companies to hold annual general meeting (AGM) in a manner similar to the one provided in General Circular No. 14/2020, dated 08.04.2020 (EGM Circular- I) and General Circular No. 17/2020 dated 13.04.2020 (EGM Circular- II), which deal with conduct of extraordinary general meeting (EGM).
2. In the meanwhile, by virtue of the General Circular No. 18/2020, dated 21.04.2020, the companies whose financial year ended on 31st December,2019, have been allowed to hold their AGM by 30th September,2020.
3. The matter has been further examined and it is stated that in view of the continuing restrictions on the movement of persons at several places in the country, it has. been decided that the companies be allowed to conduct their AGM through video conferencing (VC) or other audio visual means (OAVM), during the calendar at year 2020, subject to the fulfillment of the following requirements:
A. For companies which are required to provide the facility of e-voting under the Act, or any other company which has opted for such facility –
I. The framework provided in para 3-A of EGM circular – I and the manner and mode of issuing notices provided in sub-para (i)-A of EGM Circurlar-ll shall be applicable mutatis mutandis for conducting the AGM.
II. In such meetings, other than ordinary business, only those items of special business, which are considered to be unavoidable by the Board, may be transacted.
III. In view of the prevailing situation, owing to the difficulties involved in dispatching of physical copies of the financial statements (including Board’s report, Auditor’s report or other documents required to be attached therewith), such statements shall be sent only by email to the members, trustees for the debenture-holder of any debentures issued by the company, and to all other persons so entitled.
IV. Before sending the notices and copies of the financial statements, etc., a public notice by way of advertisement 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, preferably both newspapers having electronic editions, and specifying in the advertisement the following information.-
a. statement that the AGM will be convened through VC or OAVM in compliance with applicable provisions of the Act read with this Circular:
b. the date and time of the AGM through VC or OAVM;
c. availability of notice of the meeting on the website of the company and the stock exchange, in case of a listed company;
d. the manner in which the members who are holding shares in physical form or who have not registered their email addresses with the company can cast their vote through remote e-voting or through the e-voting system during the meeting;
e. the manner in which the persons who have not registered their email addresses with the company can get the same registered with the company;
f. the manner in which the members can give their mandate for receiving dividends directly in their bank accounts through the Eiectronic Clearing Service (ECS) or any other means;
g. any other detail considered necessary by the company
V. In case, the company is unable to pay the dividend to any shareholder by the electronic mode, due to non-availability of the details of the bank account, the company shall upon normalization of the postal services, dispatch the dividend warrant/cheque to such shareholder by post.
VI. In case, the company has received the permission from the relevant authorities to conduct its AGM at its registered office, or at any other place as provided under section 96 of the Act, after following any advisories issued from such authorities, the company may in addition to holding such meeting with physical presence of some members, also provide the facility of VC or OAVM, so as to allow other members of the company to participate in such meeting. All members who are physically present in the meeting as well as the members who attend the meeting through the facility of VC or OAVM shall be reckoned for the purpose of quorum under section 103 of the Act. All resolutions shall continue to be passed through the facility of e-voting system.
B. For companies which are not required to provide the facility of e-‘voting under the Act –
I. AGM may be conducted through the facility of VC or OAVM only by a company which has in its records, the email addresses of at least half of its total number of members, who –
a. in case of a Nidhi, hold shares of more than one thousand rupees in face value or more than one per cent, of the total paid-up share capital, whichever is less;
b. in case of other companies having share capital, who represent not less than seventy-five per cent, of such part of the paid-up share capital of the company as gives a right to vote at the meeting;
c. in case of companies not having share capital, who have the right to exercise not less than seventy-five per cent of the total voting power exercisable at the meeting.
II. The company shall take all necessary steps to register the email addresses of all persons who have not registered their email addresses with the company.
III. The framework provided in para 3-B of EGM Circular – I and the manner and mode of issuing notices provided in sub-para (i)-B of EGM Circular – II shall be applicable mutatis mutandisior conducting the AGM.
IV. In such meetings, other than ordinary business, only those items of special business, which are considered to be unavoidable by the Board, may be transacted.
V. Owing to the difficulties involved in dispatching of physical copies of the financial statements (including Board’s report, Auditor’s report or other documents required to be attached therewith), such statements shall be sent only by email to the members, trustees for the debenture-holder of any debentures issued by the company, and to all other persons so entitled.
VI. The companies shall make adequate provisions for allowing the members to give their mandate for receiving dividends directly in their bank accounts through the Electronic Clearing Service (ECS) or any other means. For shareholders, whose bank accounts are not available, company shall upon normalization of the postal services, dispatch the dividend warrant/cheque to such shareholder by post.
4. The companies referred to in paragraphs 3 (A) and (B) above, shall ensure that all other compliances associated with the provisions relating to general meetings viz making of disclosures, inspection of related documents/registers by members, or authorizations for voting by bodies corporate, etc as provided in the Act and the articles of association of the company are made through electronic mode.
5. The companies which are not covered by the General Circular No. 18/2020, dated 21.04.2020 and are unable to conduct their AGM in
accordance with the framework provided in this Circular are advised to prefer applications for extension of AGM at a suitable point of time before the concerned Registrar of Companies under section 96 of the Act.
6. This issues with the approval of the competent authority.
Yours faithfully
General Circular No. 21 /2020
F. No. 2/4/2020-CL-V
Government of India
Ministry of Corporate Affairs
5th Floor, ‘A’ Wing, Shastri Bhawan,
Dr. R. P. Road, New Delhi-110001
Dated: 11th May, 2020
To
All Regional Directors,
All Registrar of Companies
All Stakeholders
Subject: Clarification on dispatch of notice under section 62(2) of Companies Act, 2013 by listed companies for rights issue opening upto 31st July, 2020
Sir/Madarn,
Several representations have been received in the Ministry for providing clarification on the mode of issue of notice referred to in section 62(1)(a)(i) of Companies Act (the ‘Act’) read with section 62(2) of the Act for rights issue by listed companies, in view of the difficulties faced by companies in sending notices through postal or courier services on account of the threat posed by Covid-19. The issues raised in the said representations have been examined. The Circular (Number SEBI/HO/CFD/DIL2/CIR/P/2020/78) issued by SEBI on 6th May, 2020 has also been considered.
2. In view of above and on account of the overall situation, it is hereby clarified that for rights issues opening upto 31st July, 2020, in case of listed companies, which comply with the aforementioned SEBI Circular dated 6th May, 2020, inability to dispatch the notice referred in para 1 of this Circular to their shareholders through registered post or speed post or courier would not be viewed as violation of section 62(2) of the Act.
3. This issues with the approval of the competent authority.
Period/Days of Extension For Names Reserved and Resubmission of Forms
| Issue Description | Period/Days of Extension |
| 1. Names reserved for 20 days for new company incorporation. SPICe+ Part B needs to be filed within 20 days of name reservation. | Names expiring any day between 15th March 2020 to 17th May would be extended by 20 days beyond 17th May 2020. |
| 2. Names reserved for 60 days for change of name of company. INC-24 needs to be filed within 60 days of name reservation. | Names expiring any day between 15th March 2020 to 17th May would be extended by 60 days beyond 17th May 2020. |
| 3. Extension of RSUB validity for companies. | SRNs where last date of Resubmission (RSUB) falls between 15th March 2020 to 17th May 2020, additional 15 days beyond 17th May 2020 would be allowed. However, for SRNs already marked under NTBR, extension would be provided on case to case basis. Note: Forms will not get marked to (Not to be taken on Record)’NTBR’ due to non-resubmission during this extended period as detailed above. – It also includes IEPF Non-STP eForms (IEPF- 3, IEPF-5 and IEPF-7) |
| 4. Names reserved for 90 days for new LLP incorporation/change of name. FiLLiP/Form 5 needs to be filed within 90 days of name reservation. | Names expiring any day between 15th March 2020 to 17th May would be extended by 20 days beyond 17th May 2020. |
| 5. RSUB validity extension for LLPs
|
SRNs where last date of resubmission (RSUB) falls between 15th March 2020 to 17th May 2020, additional 15 days would be allowed from 17th May 2020 for resubmission. However, for SRNs already marked under NTBR, extension would be provided on case to case basis. Note: Forms will not get marked to (Not to be taken on Record)’NTBR’ due to non-resubmission during this extended period as detailed above. |
| 6. Extension for marking IEPF-5SRNS to‘Pending for Rejection u/r 7(3)’ and ‘Pending for Rejection u/r 7(7)’
|
SRNs where last date of filling eVerification Report (for both Normal as well as Re-submission filing) falls between 15th March 2020 to 17th May 2020, would be allowed to file the form till 30th Sep 2020. However, for SRNs already marked under ‘Pending for Rejection u/r 7(3)’ and ‘Pending for Rejection u/r 7(7)’, extension would be provided on case to case basis. Note: Status of IEPF-5 SRN will not change to ‘Pending for Rejection u/r 7(3)’and ‘Pending for rejection u/r 7(7)’ till 30th Sep’20. |
FAQs on Companies Fresh Start Scheme (CFSS), 2020 and LLP Modified Settlement Scheme, 2020
Question 1.
Is the CFSS 2020 applicable on foreign company? Will the forms FC-1, FC-2 and FC-3 be covered under the scheme?
Answer:
Yes.
Question 2.
How to file the belated returns for companies under liquidation?
Answer:
Only Refund form, GNL-2 (149,152,153,154,156,157,158,159 and others), INC-28 (Amalgamation/Merger/Demerger/445, 466, 481, Others), MGT-14 (Others) and GNL-4 are allowed to be filed if the company status is under liquidation.
Question 3.
Can Deactivated director activated through this scheme?
Answer:
Yes. He can file DIR-3 KYC eform/Web form and INC-22A (Active) as applicable without any payment of fee provided such director is not disqualified under section 164 of the CA 2013.
Question 4.
Should the returns be filed for the subsidiary where its Holding is currently under liquidation? But the returns relate to the period where the holding had its normal business activities. How to deal this?
Answer:
Yes.
Question 5.
Under this scheme whether AoC-4 for a year can be filed, without filling the AOC-4 for the previous year?
Answer:
Yes, you can file without filing for the previous year. There is no restriction, however it is expected that complete and continuous year filing (without skipping intermediate year) will be good corporate governance.
Question 6.
Whether any separate AOC 4 and MGT 7 has to be filed for companies under liquidation?
Answer:
There is no separate AR/BS for companies under Liquidation.
Question 7.
Whether CFSS scheme is applicable for the companies which have been automatically struck off due to non-filing of annual documents i.e. Annual Returns?
Answer:
The struck off companies have to approach the NCLT for reviving their companies first and a copy order of NCLT approving for such revival under section 252 of the CA 2013 to be filed in Form NO.INC-28. Later on they can take the benefit of this scheme.
Question 8.
With regard to LLP settlement Scheme, should the Indemnity Bond be executed on Non Judiciary Stamp Paper? If yes, then on what denomination.
Answer:
No indemnity bond is required under the LLP Settlement Scheme.
Question 9.
Applicability of CFSS to a foreign company having Project Office in India. (FC Forms to be filed in ROC).
Answer:
Yes. CFSS is applicable for foreign companies.
Question 10.
For filing MGT 14, AOC-4 for the past year, do we need to apply for condonation also?
Answer:
For filing MGT-14 beyond 300 days, condonation is required. However, AoC-4 for the past year(s) can be filed without any condonation.
Question 11.
If the Company is in Active mode, but the directors’ DINs are deactivated, what should we do? .
Answer:
Deactivated DINs for not filing the DIR-3 KYC can be activated by filing it now without the fee of INR 5000 during the currency of the CFSS, 2020 provided such director is not disqualified under section 164 of the CA 2013
Question 12.
in our case, company was struck off and as a result both directors were . disqualified. Now Company was Revived by NCLT and Revival order has been passed.
(i) How to remove disqualification of director u/s 164(2)(a)?
Answer:
The removal of disqualification is not automatic and the same cannot be cured under the provisions of CA, 2013.
(ii) INC 28 is not filed till date (as it is required to be filed within 30 Days).
Answer:
INC-28 can be filed by an authorised signatory who can be added from backend by the jurisdictional RoC based on evidence produced by the company.
(iii) How to do Annual filing of Past year?
Answer:
Past year filings can be made as per applicable norms.
Question 13.
Can a company also file its old annual returns for 3 to 4 years without late fees?
Answer:
Yes, without additional fee,
Question 14.
The company is an inactive company. The company has defaulted in filing form SH-7. It now wants to file form SH-7 under CFSS 2020 scheme and simultaneously make application for striking off the name by filing form STK 2.
Answer:
SH-7 can be filed with applicable fee and additional fee. The additional fee waiver is not applicable for SH-7 and charge related forms.
Question 15.
Please let us know the List of eForms eligible for additional fee waiver during the currency of the CFSS, 2020 and LLP Modified Settlement Scheme, 2020?
Answer:
List of forms (CA56/CA13/LLP) eligible for additional fee waiver is available at the link:
http://www.mca.gov.in/Ministry/pdf/CFSS2020_02042020.pdf
Question 16.
A Company was not able to file Satisfaction of charge in CHG 4 as the DIN of the director was deactivated. Now with this scheme can the company first update its returns, get the din activated and then file CHG 4 under this scheme even though there is a delay of 1 year?
Answer:
Deactivated DIN can be reactivated by filing DIR-3 KYC now without payment of INR 5000. Filing of CHG-4 towards satisfaction of charges beyond 300 days is NOT permissible, however for delay in filing satisfaction of charges, form no.CHG-8 may be filed and the power for such Condonation of delay (satisfaction) is vested with Regional Director(s)
Question 17.
Is CFSS-2020 scheme applicable to subsidiary of a foreign company registered in India and foreign company itself?
Answer:
Yes.
Question 18.
Can LLP with Under Strike off or ‘Defunct’ status file form 8 and form 11 for past 3-4 years? (as per the scheme or even in general)?
Answer:
No.
Question 19.
Can we file STK-2 without filing INC-20A in this scheme? As company has not started its business and even bank account is not. opened by company. So want to strike off the name and close company to avoid any defaults and penalties.
Answer:
STK-2 can be filed by a company who has not filed INC-20A within 180 days of incorporation. After a period of 180 days of incorporation, filing of form INC-20A is allowed to be filed first. Thereafter, they can file STK-2 if they desire so by following the relevant provisions of the Act relating to Strike off procedure.
Question 20.
How to rectify AOC 04 filed with inadvertent errors?
Answer:
AoC-4 or any other STP form filed with inadvertent errors can be marked as ‘defective’ by the jurisdictional RoCs based oh evidence and formal request. Once the particular STP is marked as defective fresh filing has to be made.
Question 21.
A Company already filed MGT-7 but AOC-4 is not yet filed. Can it file AOC-4 now?
Answer:
Yes.
Question 22.
Where orders have been passed by Hon’ble NCLT to restore the name of the company under section 252/253 subject to filing of all the pending documents and returns and no time limit is given in the order to file pending documents /forms/returns. The company has not yet filed the copy of order of NCLT with ROC. Can company avail this scheme and file all the pending documents without any additional fee?
Answer:
Yes, after filing INC-28 with a copy of order passed by NCLT.
Question 23.
What about the additional fee already paid by the entities? Is this not a hardship on them who have already paid heavy additional fee in order to abide the compliance.
Answer:
The CFSS 2020 and LLP Modified Settlement Scheme 2020 have been notified in view of the COVID-19. To provide a first of its kind opportunity to both Companies and LLPs to make good any filing related defaults, irrespective of duration of default, and make a fresh start as a fully compliant entity.
Question 24.
In the CFSS,2020 please suggest whether it would be applicable to Project office of a company in India having FCRN no.?
Answer:
Yes.
Question 25.
For filing commencement of business form to newly incorporated companies now additional 180 days is allowed but which companies are allowed such benefit. What is the cut off dates for newly incorporated companies i.e., to companies incorporated from which date this benefit will get passed on?
Answer:
All newly incorporated companies are required to file a declaration for Commencement of Business within 180 days of incorporation under section 10A of the Companies Act, 2013. An additional period of 180 more days has been allowed for this compliance, (please see circulars issued in March, 2020)
Question 26.
In the case of a company whose status as per MCA is active (for filing) but whose all directors are disqualified, what is the way Out to avail the benefits of the fresh start scheme?
Answer:
Disqualification of Directors cannot be cured under the scheme
Question 27.
An LLP is under non-compliance of one form. The LLP has applied for strike off in February 2020. Whether such an LLP can withdraw strike off application and file the form?
Answer:
There is no specific process available for withdrawal of Form 24. If Form 24 is not yet approved, LLP may approach the jurisdictional ROC to ‘reject’ the form so that status of LLP gets marked to ‘Active’ and relevant filings can be made.
Question 28.
Can companies with paid up capital between 5 crores to 10 crores which did not file Active form since CS was not appointed file the form now since threshold was increased to 10 crores from 5 crores from 01.04.2020?
Answer:
ACTIVE form can be filed without the fee of INR 10000.
Question 29.
What are options available to a company the name of which has been struck off by the ROC but is having business activities for availing this scheme.
Answer:
The company has to approach NCLT and get an Order for reviving. Thereafter the company can take the benefit under CFSS.
Question 30.
Does the scheme cover default for DIR-3 KYC?
Answer:
DIR-3 KYC can be filed without the fee of INR 5000.
Question 31.
Does the CFSS 2020 allows refund of the late filing fee and penalty which are already paid on Company fillings made before march 2020?
Answer:
No.
Question 32.
Whether immunity certificate will be generated automatically once CFSS form is uploaded or it will be subject to approval of concern ROC.
Answer:
Subject to examination and approval by the jurisdictional RoC.
Question 33.
Whether late fees/additional fees be waived off after filing of Immunity Form i.e. full amount will be paid in advance (while filing of any Answer:
Additional fees would not be charged in respect of the 76 forms and such forms have already been displayed in MCA-21 portal.
Question 34.
Will MCA be refunding the Additional fees received as clients have paid the same while filing the same in ROC during 2019-20?
Answer:
Additional fee waiver becomes applicable only during the currency of the scheme.
Question 35.
Can a company whose director has been disqualified can use this scheme?
Answer:
The CFSS 2020 is applicable for defaulting companies to file the belated documents and does not extend to curing the disqualification of Directors.
Question 36.
Additional fee is still showing in enquire fees menu in MCA portal. Whether it needs to be updated in portal? Or it is get updated after filing forms and generating SRN.
Answer:
Yes, it gets updated while generating challan.
Question 37.
In the original LLP Settlement Scheme, the additional fee was to be paid at INR 10 per day up to a maximum of INR 5000, in the modification LLP Settlement Scheme there is no additional fees. Is the understanding correct?
Answer:
Yes.
Question 38.
If the director has been disqualified in FY 2016-17 and filling is pending, can still the benefit of the CFSS scheme can be availed by the company (if status of company is still active)?
Answer:
CFSS 2020 does not cure the disqualification of Director. If there are no authorized signatories left in the company, the company may approach the jurisdictional RoC with a formal request to add one authorized signatory from backend. Later on the company may file the belated documents under the scheme.
Question 39.
Whether the scheme is applicable for companies already struck off by MCA and not voluntarily filed by the company?
Answer:
The struck off companies may approach the NCLT for revival. Once the company is revived the belated documents may be filed.
Question 40.
Can you please explain again on the dual dates of August 31st and September 30th in LLP (Modified) Settlement Scheme, 2020?
Answer:
The belated documents can be filed without additional fee till 31 st August,2020. However belated documents could be filed till 30th September and no prosecution or punishment proceedings would be launched.
Question 41.
LLP is not in operation since incorporation in FY 2015-16, now wants to strike off from the register. LLP has already Form 11 for FY 15-16 but not Form 8, is it mandatory to file Form 8 availing LLP scheme before filing Form 24?
Answer:
No. For list of attachments while filing Form 24, please refer to instruction kit available on the portal.
Question 42.
Which form to be file earlier CFSS-2020 or belated forms?
Answer:
Belated forms have to be filed first. CFSS-2020 would be made available w.e.f 1 st October, 2020.
Question 43.
Will this scheme be applicable on filing, if due date is falling between period April 2020 to September, 2020?
Answer:
Irrespective of the due date additional fee waiver can be availed during the currency of the scheme.
Question 44.
Is every company availing this scheme need to file FORM CFSS-2020 before filling the all the belated documents or should we file the documents directly?
Answer:
Belated documents have to be filed during the currency of the scheme. If the scheme benefits are availed, such a company has to file the CFSS e-form on or after 1st October, 2020 and before 31st March, 2021.
Question 45.
Annual Returns as well as Auditor Appointment is not done since April 2015. Can the private limited company avail this scheme?
Answer:
All companies can avail the scheme for filing belated documents.
Question 46.
If company is under NCLT, and Operations are managed by IP, whether he can opt under this scheme?
Answer:
Yes, if the company status is not struck off and if it struck off it can take the benefit after it is revived.
Question 47.
Can there be a refund of late fee deposited for forms filed earlier the notification of scheme (forms filed are covered in scheme)?
Answer:
No.
Question 48.
As under CFSS, CFSS Form needs to be filed between 01 st October to 31st March, do we need to file any such form under LLP Modified Settlement Scheme to get immunity?
Answer:
No such requirement for LLPs who have availed the benefit under the LLP Modified Settlement Scheme.
Question 49.
Is the Form CFSS 2020 currently available in the MCA portal for e-filing? If not, when will the form be made available?
Answer:
The form CFSS 2020 would be made available w.e.f 1st October 2020 and till 31st March 2021 for filing purposes.
Question 50.
Form 8 is not allowing prefill for an LLP which is under defunct status. How Should we avail the scheme for such LLP? Is the scheme available? Will new forms be made available then?
Answer:
An LLP under struck off(Defunct) status cannot avail the benefit of LLP Modified Settlement Scheme.
General Circular No. 15 /2020
F. No. CSR-01/4/2020-CSR-MCA
Government of India
Ministry of Corporate Affairs
10th April, 2020
COVID-19 related Frequently Asked Questions (FAQs) on
Corporate Social Responsibility (CSR)
The Ministry has been receiving several references/ representations from various stakeholders seeking clarifications on eligibility of CSR expenditure related to COVID-19 activities. In this regard, a set of FAQs along with clarifications are provided below for better understanding of the stakeholders:
| Frequently asked questions (FAQs) | Reply |
| 1. Whether contribution made to ‘PM CARES Fund’ shall qualify as CSR expenditure? | Contribution made to ‘PM CARES Fund’ shall qualify as CSR expenditure under item no (viii) of Schedule VII of the Companies Act, 2013 and it has been further clarified vide Office memorandum F. No. CSR-05/1/2020-CSR-MCA dated 28th March, 2020. |
| 2. Whether contribution made to ‘Chief Minister’s Relief Funds’ or ‘State Relief Fund for COVID-19’ shall qualify as CSR expenditure? | ‘Chief Minister’s Relief Fund’ or ‘State Relief Fund for COVID-19’ is not included in Schedule VII of the Companies Act, 2013 and therefore any contribution to such funds shall not qualify as admissible CSR expenditure. |
| 3. Whether contribution made to State Disaster Management Authority shall qualify as CSR expenditure? | Contribution made to State Disaster Management Authority to combat COVID-19 shall qualify as CSR expenditure under item no (xii) of Schedule VII of the 2013 and clarified vide general circular No. 10/2020 dated 23rd March, 2020 |
| 4. Whether spending of CSR funds for COVID-19 related activities shall qualify as CSR expenditure? | Ministry vide general circular No. 10/2020 dated 23rd March, 2020 has clarified that spending CSR funds for COVID-19 related activities shall qualify as CSR expenditure. It is further clarified that funds may be spent for various activities related to COVID-19 under items nos. (i) and (xii) of Schedule VII relating to promotion of health care including preventive health care and sanitation, and disaster management. Further, as per general circular No. 21/2014 dated 18.06.2014, items in Schedule VII are broad based and may be interpreted liberally for this purpose. |
| 5. Whether payment of salary/wagesto employees and workers, including contract labour, during the lockdown period can be adjusted against the CSR expenditure of the companies? | Payment of salary/ wages in normal circumstances is a contractual and statutory obligation of the company. Similarly, payment of salary/ wages to employees and workers even during the lockdown period is a moral obligation of the employers, as they , have no alternative source of employment or livelihood during this period. Thus, payment of salary/ wages to employees and workers during the lockdown period (including imposition of other social distancing requirements) shall not qualify as admissible CSR expenditure. |
| 6. Whether payment of wages made to casual /daily wage workers during the lockdown period can be adjusted against the CSR expenditure of the companies? | Payment of wages to temporary or casual or daily wage workers during the lockdown period is part of the moral/ humanitarian/ contractual obligations of the company and is applicable to all companies irrespective of whether they have any legal obligation for CSR contribution under section 135 of the Companies Act 2013. Hence, payment of wages to temporary or casual or daily wage workers during the lockdown period shall not count towards CSR expenditure. |
| 7. Whether payment of exgratia to temporary /casual /daily wage workers shall qualify as CSR expenditure? | If any ex-gratia payment is made to temporary/casual workers/ daily wage workers over and above the disbursement of wages, specifically for the purpose of fighting COVID 19, the same shall be admissible towards CSR expenditure as a onetime exception provided there is an explicit declaration to that effect by the Board of the company, which is duly certified by the statutory auditor. |
This issues with the approval of competent authority.
Ministry of Corporate Affairs Notification
New Delhi, the 29th April, 2020
G.S.R 268 (E). – In exercise of the powers conferred by section 149 read with section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Appointment and Qualification of Directors) Rules, 2014, namely:-
1. (1) These rules may be called the Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2020.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Companies (Appointment and Qualification of Directors) Rules, 2014, in rule 6, in sub-rule (1), in clause (a), for the words “five months” the words “seven months” shall be substituted.
[F. No. 8/4/2018-CL-I-Part I]
K.V.R. MURTY, Jt. Secy.
Note: The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide notification number G.S.R. 259(E), dated the 31st March, 2014 and were last amended vide notification number G.S.R. 145 (E), dated the 28th February, 2020.
Securities and Exchange Board of India
Securities And Exchange Board Of India Notification
Mumbai, the 9th November, 2021
Securities and Exchange board of India (Listing Obligations and Disclosure Requirements) (Sixth Amendment) Regulations, 2021 SEBI/LAD-NRO/GN/2021/55.- In exercise of the powers conferred by section 11 . sub-section (2) of section 11A and section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) read with section 31 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Board hereby makes the following regulations to further amend the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, namely:-
1. These regulations may be called the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Sixth Amendment) Regulations, 2021.
2. They shall come into force with effect from April 1, 2022 unless otherwise specified in the respective provision of the regulation.
3. In the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015,
I. in regulation 2, in sub-regulation (1),
a. in clause (zb), the first proviso shall be substituted with the following, namely,- “Provided that:
(a) any person or entity forming a part of the promoter or promoter group of the listed entity; or
(b) any person or any entity, holding equity shares:
(i) of twenty per cent or more; or
(ii) of ten per cent or more, with effect from April 1,2023; in the listed entity either directly or on a beneficial interest basis as provided under section 89 of the Companies Act, 2013, at anytime, during the immediate preceding financial year; shall be deemed to be a related party:”
b. clause (zc), shall be substituted with the following, namely, – “(zc) “related party transaction” means a transaction involving a transfer of resources, services or obligations between:
(i) a listed entity or any of its subsidiaries on one hand and a related party of the listed entity or any of its subsidiaries on the other hand; or
(ii) a listed entity or any of its subsidiaries on one hand, and any other person or entity on the other hand, the purpose and effect of which is to benefit a related party of the listed entity or any of its subsidiaries, with effect from April 1, 2023; regardless of whether a price is charged and a “transaction” with a related party shall be construed to include a single transaction or a group of transactions in a contract:
Provided that the following shall not be a related party transaction:
(a) the issue of specified securities on a preferential basis, subject to compliance of the requirements under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018;
(b) the following corporate actions by the listed entity which are uniformly applicable/offered to all shareholders in proportion to their shareholding:
- payment of dividend;
- subdivision or consolidation of securities;
- issuance of securities by way of a rights issue or a bonus issue; and
- buy-back of securities.
(c) acceptance of fixed deposits by banks/Non-Banking Finance Companies at the terms uniformly applicable/offered to all shareholders/public, subject to disclosure of the same along with the disclosure of related party transactions every six months to the stock exchange(s), in the format as specified by the Board:
Provided further that this definition shall not be applicable for the units issued by mutual funds which are. listed on a recognised stock exchange(s);
II. in regulation 23,
a. in sub-regulation (1), the existing Explanation shall be substituted with the following, namely,
“Provided that a transaction with a related party shall be considered material, if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds rupees one thousand crore or ten per cent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity, whichever is lower.”
b. in sub-regulation (2), after the words “party transactions” the words “and subsequent material modifications” shall be inserted and the words and symbol “audit committee.” shall be substituted with the words and symbol “audit committee of the listed entity:”
c. in sub-regulation (2), after the existing proviso, the following shall be inserted, namely, –
“Provided further that:
(a) the audit committee of a listed entity shall define “material modifications” and disclose it as part of the policy on materiality of related party transactions and on dealing with related party transactions;
(b) a related party transaction to which the subsidiary of a listed entity is a party but the listed entity is not a party, shall require prior approval of the audit committee of the listed entity if the value of such transaction whether entered into individually or taken together with previous transactions during a financial year exceeds ten per cent of the annual consolidated turnover, as per the last audited financial statements of the listed entity;
(c) with effect from April 1,2023, a related party transaction to which the subsidiary of a listed entity is a party but the listed entity is not a party, shall require prior approval of the audit committee of the listed entity if the value of such transaction whether entered into individually or taken together with previous transactions during a financial year, exceeds ten per cent of the annual standalone turnover, as per the last audited financial statements of the subsidiary;
(d) prior approval of the audit committee of the listed entity shall not be required for a related party transaction to which the listed subsidiary is a party but the listed entity is not a party, if regulation 23 and sub-regulation (2) of regulation 15 of these regulations are applicable to such listed subsidiary.
Explanation: For related party transactions of unlisted subsidiaries of a listed subsidiary as referred to in (d) above, the prior approval of the audit committee of the listed subsidiary shall suffice.”
d. in sub-regulation (4), afterthe words “related party transactions” the words and symbol “and subsequent material modifications as defined by the audit committee under sub-regulation (2),” shall be inserted and after the words “shall require” the word “prior” shall be inserted.
e. in sub-regulation (4), before the existing proviso, the following shall be inserted, namely, -‘
“Provided that prior approval of the shareholders of a listed entity shall not be required for a related party transaction to which the listed subsidiary is a party but the listed entity is not a party, if regulation 23 and sub-regulation (2) of regulation 15 of these regulations are applicable to such listed subsidiary.
Explanation: For related party transactions of unlisted subsidiaries of a listed subsidiary as referred above, the prior approval of the shareholders of the listed subsidiary shall suffice.”
f. in sub-regulation (4), in the existing proviso, the word “further” shall be inserted after the word “Provided”.
g. in sub-regulation (5), after clause (b), the following new clause shall be inserted, namely,
“(c) transactions entered into between two wholly-owned subsidiaries of the listed holding company, whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.”
h. sub-regulation (7) shall be omitted.
i. sub-regulation (9) shall be substituted with the following, namely, –
“(9) The listed entity shall submit to the stock exchanges disclosures of related party transactions in the format as specified by the Board from time to time, and publish the same on its website:
Provided that a ‘high value debt listed entity’ shall submit such disclosures along with its standalone financial results for the half year:
Provided further that the listed entity shall make such disclosures every six months within fifteen days from the date of publication of its standalone and consolidated financial results: Provided further that the listed entity shall make such disclosures every six months on the date of publication of its standalone and consolidated financial results with effect from April 1,2023.”
iii. In Schedule II,
a. in Part C, in para B, point 2 shall be omitted.
IV. in Schedule V,
a. in para A, in point 1, after the words “listed entity” the words and symbol, “which has listed its non-convertible securities” shall be inserted.
b. in para A, point 3, shall be substituted with the following, namely,
“3. The above disclosures shall not be applicable to listed banks.”
c. in para C, in point 10, after clause (I), the following new clause shall be inserted, namely,
“(m) disclosure by listed entity and its subsidiaries of ‘Loans and advances in the nature of loans to firms/companies in which directors are interested by name and amount’:
Provided that this requirement shall be applicable to all listed entities except for listed banks.”
AJAY TYAGI, Chairman
[ADVT.-lll/4/Exty./409/2021 -22]
Footnotes:
1. The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 were published in the Gazette of India on 2nd September 2015 vide No. SEBI/LAD-NRO/GN/2015-16/013.
2. The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, were subsequently amended on:
(a) December 22,2015 by the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2015 vide notification no. SEBI/LAD-NRO/GN/2015-16/27.
(b) May 25, 2016 by Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2016 vide notification no. SEBI/LAD-NRO/GN/ 2016-17/001.
(c) July 8, 2016 by Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2016 vide notification no. SEBI/ LAD-NRO/GN/2016-17/008.
(d) January 4,2017 by Securities and Exchange Board of India (Listing , Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2016 vide notification no. SEBI/ LAD-NRO/GN/2016-17/025.
(e) February 15, 2017 by Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2017 vide notification no. SEBI/LAD/NRO/GN/2016-17/029.
(f) March 6, 2017 by the Securities and Exchange Board of India (Payment of Fees and Mode of Payment) (Amendment) Regulations, 2017 vide Notification No. LAD-NRO/GN/2016-17/037 read with March 29, 2017 by Securities and Exchange Board of India (Payment of Fees and Mode of Payment) (Amendment) Regulations, 2017 vide notification no. SEBI/LAD/NRO/GN/2016-17/38.
(g) May 9,2018 by the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018 vide notification no. SEBI/LAD-NRO/GN/2018/10.
(h) May 30, 2018 by the Securities and Exchange Board of India
(Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2018 vide notification no. SEBI/LAD-NRO/GN/2018/13.
(i) June 1,2018 by the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2018 vide notification no. SEBI/LAD-NRO/GN/2018/21.
(j) June 8,2018 by the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Fourth Amendment) Regulations, 2018 vide notification no. SEBI/LAD-NRO/GN/2018/24.
(k) September 6,2018 by the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Fifth Amendment) Regulations, 2018 vide notification no. SEBI/LAD-NRO/GN/2018/30.
(l) November 16,2018 by the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Sixth AmSnamem) Regulations, 2018 vide notification no.
SEBI/LAD-NRO/GN/2018/47.
(m) March 29, 2019 by the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2019 vide notification no. SEBI/LAD-NRO/GN/2019/07.
(n) May 7,2019 by the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2019, vide notification no. SEBI/ LAD-NRO/GN/2019/12.
(o) June 27, 2019 by the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2019, vide notification no. SEBI/ LAD-NRO/GN/2019/22,
(p) July 29,2019 by the Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) (Fourth Amendment) Regulations, 2019, vide notification no. SEBI/
LAD-NRO/GN/2019/28.
(q) December 26,2019 by the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Fifth Amendment) Regulations, 2019, vide notification no. SEBI/ LAD-NRO/GN/2019/45.
(r) January 10, 2020 by the Securities and Exchange Board of India
(Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2020, vide notification no. SEBI/
LAD-N RO/G N/2020/02.
(s) April 17, 2020 by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2020 vide no. SEBI/LAD-NRO/GN/2020/10.
(t) August 5, 2020 by the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2020. vide notification no. SEBI/ LAD-N RO/GN/2020/25.
(u) October 8, 2020 by the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2020, vide notification no. SEBI/ LAD-NRO/GN/2020/33.
(v) January 8, 2021 by the Securities and Exchange Board of India
(Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2021, vide notification no. SEBI/
LAD-NRO/GN/2021/02.
(w) May 5,2021 by the Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2021, vide notification no. SEBI/
LAD-NRO/G N/2021 /22.
(x) August 3, 2021 by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2021 vide notification no. No. SEBI/LAD-NRO/GN/2021/30.
(y) August 3, 2021 by the Securities and Exchange Board of India
(Listing Obligations and ’ Disclosure Requirements) (Third Amendment) Regulations, 2021, vide notification no. SEBI/
LAD-NRO/GN/2021/35.
(z) August 13, 2021 by the Securities and Exchange Board of India
(Listing Obligations and Disclosure Requirements) (Fourth Amendment) Regulations, 2021, vide notification no. SEBI/
LAD-N FO/GN/2021 /42.
(aa) September 7,2021 by the Securities and Exchange Board Of India (Listing Obligations and Disclosure Requirements) (Fifth
Amendment) Regulations, 2021, vide notification no. SEBI/LAD-NRO/GN/2021/47.
Circular
SEBI/HO/CFD/CMD1/CIR/P/2021/662
November 22, 2021
To,
All entities that have listed their specified securities
All the Recognized Stock Exchanges
Madam /Sir,
Subject: Disclosure obligations of listed entities in relation to Related Party Transactions
1. Vide notification dated November 9, 2021, Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015 (‘LODR Regulations’) was amended, interalia, mandating listed entities that have listed specified securities to submit to the stock exchanges disclosure of Related Party Transactions (RPTs) in the format specified by the Board from time to time.
2. Further, it has been decided to prescribe the information to be placed before the audit committee and the shareholders for consideration of RPTs.
3. Accordingly, the following provisions shall apply to entities that have listed specified securities on a Recognized Stock Exchange.
A. Information to be reviewed by the Audit Committee for approval of RPTs
4. The listed entity shall provide the following information, for review of the audit committee for approval of a proposed RPT:
a. Type, material terms and particulars of the proposed transaction;
b. Name of the related party and its relationship with the listed entity or its subsidiary, including nature of its concern or interest (financial or othetwise);
c. Tenure of *he proposed transaction (particular tenure shall be specified);
d. Value of the proposed transaction;
e. The percentage of the listed entity’s annual consolidated turnover, for the immediately preceding financial year, that is represented by the value of the proposed transaction (and for a RPT involving a subsidiary, such percentage calculated on the basis of the subsidiary’s annual turnover on a standalone basis shall be additionally provided);
f. If the transaction relates to any loans, inter-corporate deposits, advances or investments made or given by the listed entity or its. subsidiary:
(i) details of the source of funds in connection with the proposed transaction;
(ii) where any financial indebtedness is incurred to make or give loans, intercorporate deposits, advances or investments,
- nature of indebtedness;
- cost of funds; and
- tenure;
(iii) applicable terms, including covenants, tenure, interest rate and repayment schedule, whether secured or unsecured; if secured, the nature of security; and
(iv) the purpose for which the funds will be utilized by the ultimate beneficiary of such funds pursuant to the RPT.
g. Justification as to why the RPT is in the interest of the listed entity;
h. A copy of the valuation or other external party report, if any such report has been relied upon;
i. Percentage of the counter-party’s annual consolidated turnover that is represented by the value of the proposed RPT on a voluntary basis;
j. Any other information that may be relevant
5. The audit committee shall also review the status of long-term (more than one year) or recurring RPTs on an annual basis.
B. Information to be provided to shareholders for consideration of RPTs
6. The notice being sent to the shareholders seeking approval for any proposed RPT shall, in addition to the requirements under the Companies Act, 2013, include the following information as a part of the explanatory statement:
a. A summary of the information provided by the management of the listed entity to the audit committee as specified in point 4 above;
b. Justification for why the proposed transaction is in the interest of the listed entity;
c. Where the transaction relates to any loans, inter-corpprate deposits, advances or investments made or given by the listed entity or its subsidiary, the details specified under point 4(f) above; (The requirement of disclosing source of funds and cost of funds shall not be applicable to listed banks/NBFCs.)
d. A statement that the valuation or other external report, if any, relied upon by the listed entity in relation to the proposed transaction will be made available through the registered email address of the shareholders;
e. Percentage of the counter-party’s annual consolidated turnover that is represented by the value of the proposed RPT, on a voluntary basis;
f. Any other information that may be relevant.
C. Format for reporting of RPTs to the Stock Exchange
7. The listed entity shall make RPT disclosures every six months in the format provided at Annex.
8. This Circular shall come into force with effect from April 1, 2022. The Stock Exchanges are advised to bring the provisions of this circular to the notice of ail listed entities that have issued specified securities and also disseminate on their websites.
9. The Circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Regulation 101 of the LODR.
10. This Circular is available at www.sebi.gov.in under the link “Legal Circulars”.
Yours faithfully,
Amy Durga Menon
Deputy General Manager
Corporation Finance Department
Compliance and Monitoring Division-1
+91-22-26449584
amydurga@sebi.gov. in
Anti-Corruption and Anti-Bribery Laws in India Notes
‘Facilitation payment’:
‘Facilitation payment’ means a payment made to government or private official that acts as an incentive for the official to complete some action or process expeditiously to the benefit of the party making the payment.
‘Foreign public official’:
‘Foreign public official’ means any person holding a legislative, executive, administrative or judicial office of a foreign country, whether appointed or elected, whether permanent or temporary, whether paid or unpaid and includes a person who performs a public function or provides service for a foreign country.
Bribery:
‘Bribery’ includes giving or receiving bribe and third party gratification. The act of giving bribe is when committed intentionally in the course of economic, financial or commercial activities and when it is established that there is a promise, offering or giving, directly or indirectly, of an undue advantage to any person who directs or works, in any capacity, for a commercial entity, for the person himself or for another person, in order that he in breach of his duties, act or refrain from acting.
PCA:
The Prevention of Corruption Act, 1988 is an Act of the Parliament of India enacted to pombat corruption in government agencies and public sector businesses in India.
CVC:
Gentral Vigilance Commission is an apex Indian governmental body created in 1964 to address governmental corruption. Recently, in 2003, the Parliament enacted a law conferring statutory status on the CVC.