Companies Act Current Affairs

Government makes demat mandatory for issue and transfer of shares

Union Ministry of Corporate Affairs (MCA) has mandatory for unlisted public companies to issue new shares or transfer of all shares in dematerialised or demat (i.e. in electronic form) form beginning October 2, 2018. With this, major benefits of dematerialisation of securities will now be available to unlisted Public companies.

Key Facts

The Companies Act 2013, provides for government to mandate that as in case of listed public companies other classes of public companies should also issue securities only in dematerialised form. MCA’s latest step is seen as measure for further enhancing transparency, investor protection and governance in the corporate sector. It also comes at a time when the ministry is clamping down on shell companies that are suspected of being conduits for illicit fund flows

Major benefits of dematerialisation of securities

It will help in elimination of risks associated with physical certificates such as loss, theft, mutilation, fraud etc. It will help in improving corporate governance system by increasing transparency and preventing mal-practices such as benami shareholding, back dated issuance of shares, etc. It will also ease in transfer, pledge etc. of securities and provide exemption from payment of stamp duty on transfer.

Unlisted Companies

According to Companies Act 2013, a public company is formed by seven persons or more, while for private company this number is two or more. If shares of such companies are not traded on stock exchange, they are called unlisted companies.

Month: Categories: Business & Economy Current Affairs 2018

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Government sets up committee to review the enforcement of CSR provisions

The Ministry of Corporate Affairs (MCA) has constituted 12-member committee to review enforcement of Corporate Social Responsibility (CSR) provisions under Companies Act, 2013. It will be headed by Regional Director (Western Region) Manmohan Juneja. Besides, there will be two sub-committees viz. legal and technical that will go into various aspects in relation to compliance with CSR provisions.

Committee’s Terms of References

The committee will review functioning of CSR enforcement and recommend uniform approach for its enforcement. It will revisit guidelines for enforcement of CSR provisions and basis, including structure of Centralised Scrutiny and Prosecution Mechanism (CSPM).

It will also look at methodologies for monitoring of compliance by companies with CSR norms for having an effective CSPM. It will also revisit Schedule VII of Companies Act, 2013 pertaining to the board list of CSR activities that can be taken up under the Act on basis of references received from various stakeholders.

Background

Under Companies Act, 2013, certain class of profitable companies (entities) are required to shell out at least 2% of their three-year annual average net profit towards CSR activities. In case of non-compliance, these companies have to furnish reasons to Ministry of Corporate Affairs (MCA). In recent times, MCA has come across rising instances of non-compliance with CSR requirement. Last year, MCA had sought explanation from many companies for not complying with CSR norms. As per official data, 6,286 companies spent Rs. 4,719 crore towards various CSR activities in 2016-17, with total number of such projects taken up stood at 11,597.

Month: Categories: India Current Affairs 2018

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