Companies Act Current Affairs - 2019
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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.
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.
The Ministry of Corporate Affairs has notified the Companies (Amendment) Act, 2017. The Amendment Act amended some provisions of Companies Act, 2013.
Few provisions in the Amendment Act have important bearing on the working of the Insolvency and Bankruptcy Code (IBC), 2016. They will come into force on date as Government notify in Official Gazette. It aims to help in simplifying procedures, make compliance easy and take stringent action against defaulting companies.
Issuance of shares at a discount: It was prohibited by Section 53 of the Act. The Amendment Act allows companies to issue shares at discount to its creditors when its debt is converted into shares in pursuance of any statutory resolution plan such as resolution plan under IBC or debt restructuring scheme.
Payment of managerial remuneration in excess: It was required for company in general meeting for payment of managerial remuneration in excess of 11% of net profits as per Section 197 of parent Act. The Amendment Act now requires company which has defaulted in payment of dues, prior approval of bank or public financial institution concerned or non-convertible debenture holders or other secured creditor. For such payment of managerial remuneration shall be obtained by company before obtaining approval in general meeting.
Prohibition of registered valuer from undertaking valuation of any assets: Section 247 of Companies Act, 2013 them of any assets in which they have direct or indirect interest or becomes so interested at any time during or after valuation of assets. The Amendment Act now prohibits registered valuer to be appointment as valuer or three years after valuation of assets was conducted by him.