Latest Critical issues

in
Companies Act including
Deposits, CLFSS & LLPSS

CA. PRAMOD JAIN

B. COM (H), FCA, FCS, FCMA, LL.B, MIMA, DISA, IP
Shared at
Webinar, Shalimar Bagh CPE Study Circle of NIRC of ICAI
1st August 2020
 CA. Pramod Jain
FINE REPLACED WITH PENALTY
 16 cases
 Fine by NCLT, Penalty by RoC
1. S. 53(3) – Prohibition on issue of shares at
discount
2. S. 64(2) - Notice to be given to Registrar for
alteration of share capital
3. S. 92(5) – Annual Return
4. S. 102(5) - Statement to be annexed to Notice
5. S. 105 - Proxies
6. S. 117(2) - Resolutions and Agreements to be filed
7. S. 121(3) -Report on annual general meeting
 CA. Pramod Jain
FINE REPLACED WITH PENALTY
8. S. 137(3) - Copy of financial statement to be filed with
Registrar
9. S. 140(3) - Removal, resignation of auditor and giving of
special notice
10. S. 157(2) - Company to inform DIN to Registrar
11. S. 159 - Punishment for Contravention – in respect of DIN
12. S. 165(6) - Number of Directorships
13. S. 191(5) - Payment to Director for Loss of Office
14. S. 197(15) - Overall maximum managerial remuneration
and managerial remuneration in case of absence or
inadequacy of profits
15. S. 203(5) - Appointment of KMP
16. S. 238(3) - Registration of the offer of scheme involving
transfer of shares
 CA. Pramod Jain
COMMENCEMENT OF BUSINESS
 S. 10A introduced – reintroduction
 Earlier removed by amending s. 11 through
Companies (Amendment) Act 2015.
 Any company incorporated on or after 2nd
November 2018, shall not commence business
or exercise any borrowing powers, unless:
 It files a declaration in Form INC 20A within 180
days of incorporation, confirming that every
subscriber to the Memorandum has paid the value
of shares agreed to be taken by him, AND
 Files a verification of its registered office address
with the RoC within 30 days of incorporation.
 CA. Pramod Jain
COMMENCEMENT OF BUSINESS
 In case of default – penalty:
 Company – Rs. 50K
 OID – Rs. 1000/- per day subject to maximum Rs. 1
Lakh.
 Failure in filing and Registrar has reasonable
cause to believe that company not carrying on
any business – may initiate action for removal
of name from Register of Companies u/s 248
 S. 248 also amended consequently.
 CA. Pramod Jain
S. 92 ANNUAL RETURN
 If filed within 60 days in MGT 7– normal fee
 Upto 30.6.2018 additional fee till 300 days

 W.e.f. 1.7.2018 additional fee Rs. 100/- pd

 After that penalty (earlier fine w.e.f. 2nd

November 2018):
 On Company and Officer in default
minimum 50K
Rs. 100/- per day on continuous default.

maximum – 500K

 Imprisonment on OID upto 6 mnths omitted

 CA. Pramod Jain

S. 137 FILING OF FS
 Form AOC -4 within 30 days of AGM
 Upto 30.6.2018 additional fee till 300 days

 W.e.f. 1.7.2018 additional fee Rs. 100/- pd

 Penalty on

 Company – 1k p. d > 10 L;

 MD, etc in charge by Board- if no one – all

directors
Penalty– Min 1 L
Rs. 100/- per day if continuous default

Maximum 5 L
 CA. Pramod Jain
S. 117 FILING OF RESOLUTIONS
 Earlier for default – fine:
 Company:
 Min. Rs. 1 Lakh; Max. Rs. 25 L
 OID:
 Min. Rs. 50K; Max. Rs. 5 L
 Now – penalty:
 Company:
 Min.Rs. 1 Lakh, continuing Rs. 500/- p.d.
 Max. Rs. 25 L

 OID including liquidator:

 Min.Rs. 50K, continuing Rs. 500/- p.d.
 Max. Rs. 5 L
 CA. Pramod Jain
S. 140 AUDITOR RESIGNATION
 Earlier for default – fine:
 Min.Rs. 50K or remuneration of auditor
whichever is less
 Max. Rs. 5 L

 Now – penalty:
 Min.Rs. 50K or remuneration of auditor
whichever is less;
 Continuing default Rs. 500/- p.d.

 Max. Rs. 5 L
 CA. Pramod Jain
CLFSS 2020
 Company Law Fresh Start Scheme
 No additional fees - for late filing of
Forms during moratorium period from
1st April to 30th September 2020,
irrespective of its due date
 Only Normal Fee to be paid

 If appeal filed against penalty – has to

withdraw
 CA. Pramod Jain
CLFSS 2020
 Scheme applicable to all Forms,
except:
Increase in Authorised Capital (SH-7)

Charge related:
CHG-1

CHG-4

CHG-8

CHG-9
 CA. Pramod Jain
CLFSS 2020 - IMMUNITY
 Immunity from penal proceedings,
including for late submissions &
prosecutions
 Immunity only against delayed filings and
not against any substantive violation of law.
For e.g. - S. 42 – utilization of money.
 For immunity Form CLFSS-2020 to be filed
after 30th September 2020 and DA take it
on record but not after 6 months from end
of scheme – Nil Fee
 CA. Pramod Jain
CLFSS 2020
 Immunity not applicable:
Any matter pending before any court of
law
Court has ordered any conviction

Penalty order has been passed by

adjudicating authority and no appeal is
preferred
 Where order u/s 454(6) falls between
1.3.2020 to 31.5.2020 additional 120 days
allowed to file appeal – no prosecution
 CA. Pramod Jain
CLFSS 2020
 Following cannot avail of this scheme:
Cos. against which action for final notice
of strike down has been initiated by ROC
Companies have themselves filed
application for strike-off
Companies which have amalgamated

Where applications have been filed for

Dormant status
Vanishing Companies
 CA. Pramod Jain
CLFSS 2020
 DINs marked as ‘Deactivated’ due to non-
filing of DIR-3KYC !
 Companies whose compliance status has
been marked as “ACTIVE non-compliant”
due to non-filing of ACTIVE e-form !
 Can file between 1st April 2020 to 30th
September 2020 without any filing fee of
Rs. 5000/10000 respectively.
 CA. Pramod Jain
CLFSS 2020 – INACTIVE
 Apply to get themselves declared as
dormant company u/s 455 by filing e-
form MSC-1 at a normal fee on said
form;
 OR

 Apply for striking off the name of the

company by filing e-Form STK-2 by
paying fee payable on form STK-2
 CA. Pramod Jain
SCHEME - CHARGES
 Scheme for relaxation of time for filing
Forms related to Creation and
Modification of Charges
 Only CHG-1 & CHG-9 covered. Time:
is before O1.03.2020, but the timeline for
filing such form had not expired u/s 77 as
on O1.03.2020, or
falls on any date between 01.O3.2O2O to
3O.O9.2O2O (both dates inclusive).
 CA. Pramod Jain
SCHEME - CHARGES
 Ifnot filed by 30.9.2020… 1st day to
start from 1.10.2020
 Normal Fee applicable till 30.9.2020

 Not applicable to
 CHG-1 & CHG-9 filed before 17.6.20
 Timeline for filing Form expired prior to 1.3.2O

 Timeline for filing Form expires at future date,

despite exclusion of 30.9.2020 time given.
 Form CHG-4 - satisfaction of charges.
 CA. Pramod Jain
LLPSS 2020
 LLP Settlement Scheme 2020
 Origonally from 16.3.2020 to
13.6.2020
AdditionalFee of Rs. 10/- was to be paid
Maximum Additional Fee Rs. 5000/-

Scheme amended vide circular dated

30.3.2020
Now no Additional Fee
 CA. Pramod Jain
LLPSS 2020
 For
Forms due till 31.08.2020:
Form 11

Form 8

Form 3

Form 4

 Not applicable for LLP who have

applied for strike-off u/s 24
 Immunity from prosecution if go for
LLPSS 2020
CA. Pramod Jain
 CA. Pramod Jain
DEPOSITS
 Following may invite, accept or renew
deposits :
Banking companies - (RBI);

NBFC – (RBI);

Notified companies;

Public company having net worth

> 100 Cr or turnover > 500 Cr
(Rules)
 CA. Pramod Jain
DPT-3
 To be filed annually by 30th June and furnish
information as on 31st March of that year duly
audited by auditor of the company.
 Was to be filed only by cos. accepting deposits

 Later companies accepting deposits from

shareholders also covered w.e.f. 19th
September 2017
 Insertions made to Rule 16 and 16A of the
Deposit Rules vide notification dated 22nd
January 2019
 Form DPT-3 also amended.
 CA. Pramod Jain
DPT-3 - ANNUALLY
 Explanation to Rule 16 added – to clarify
that DPT-3 is to be filed annually by every
company other than Government
company for :
Deposit or

Particulars of transaction not

considered as deposit or
Both

 Auditor’s Report /Certificate

 CA. Pramod Jain
DPT-3 – ONE TIME
 Sub-rule (3) added to Rule 16A :
 Every company other than Government
company shall file a 1 time return of
 outstanding receipt of money or loan by a
company but not considered as deposits, in
terms of rule 2(1)(c)
 from 1st April, 2014 to 31.3.2019,

 within 90 days from 1st April 2019

(29.6.2019)
 along with fee.
 CA. Pramod Jain

Amounts
Received

Deposits Exempt Deposits

From
From Public
shareholders
 CA. Pramod Jain
EXEMPT DEPOSITS
 Amount received from CG, SG, L Auth., Stat. Auth.
 Amount from Foreign Govt, Bank, etc as per FEMA
 Amount received from Banks, PFIs, CPs
 ICD
 From director out of his own funds – to report in D.R.
w.e.f. 15.9.15 – FS – 29.6.16
 From relative of director for Pvt. Co. out of his own funds
– to report in D.R. w.e.f. 15.9.15 – FS – 29.6.16
 Convertible bond / debenture – shares within 5 years 10
from 29.6.16. & Listed unsecured NCD
 Interest free security deposit – employee – 1 yr salary
 CA. Pramod Jain
EXEMPT DEPOSITS
 Share appl. money, except not allotted /
refunded
 Non-Interest bearing amt received & held in Trust

 Business advances:

 Supply of goods / services – within 365 days

 Against Immovable property – if adjusted as

per agreement
 Security deposit for performance of contract
for supply of goods or provision of services
 Under long term project-supply of capital goods
 CA. Pramod Jain
EXEMPT DEPOSITS
 Advance for providing future services in form of
warranty or maintenance contract (written) upto 5
years – 29.6.2016
 Advance received and as allowed by sectoral
regulator as per CG or SG – 29.6.2016
 Advance for subscription towards publication –
29.6.2016
 If Co. accepting money does not have necessary
permission or approval to deal in goods or
properties or services -Deposit
 Subscription to chit under Chit Fund Act– 29.6.16
 CA. Pramod Jain
EXEMPT DEPOSITS
 Rs. 25 Lakh or more by start up company in
single tranche by convertible note (in equity
or repayable within 5 years) – 29.6.16
 Promoters - stipulation of any FI or a banks:-
 Loan is brought in pursuance of stipulation imposed
by lending institutions on promoters to contribute
such finance; and
 Loan is provided by the promoters themselves and/or
by their relatives.
 Exemption available only till loans are repaid
 CA. Pramod Jain
EXEMPT DEPOSITS
 From Nidhi Companies
 Amount received by the company under any
collective investment scheme in compliance with
regulations framed by SEBI (29.6.2016)
 Amount received by a company from Alternate
Investment Funds, Domestic Venture Capital
Funds & Mutual Funds reg. with SEBI (29.6.16)
 From Infrastructure Investment Trusts
(11.5.2017)
 From Real Estate Investment Trusts (22.01.2019)
 CA. Pramod Jain
Deposits from
Members
From 19th September
2017

Private Companies
without default in
Public Companies
filing AOC-4 or
MGT-7
Other than Specified IFSC Eligible Other
Start-up
Start-up Public company Companies Companies

For 5 Years If 3 Upto 100% Upto 35% of

Other of its paid Upto 10% of
without limit conditions its paid up
Companies up capital, its paid up
without met capital,
complying s. securities capital, securities
73(2)(a) to premium & securities premium
Upto 100% of free
(e) Without any its paid up premium and free
limit without reserves and free reserves.
capital, Comply
complying s. Securities reserves. Comply with
73(2)(a) to with Sec Comply with Sec 73(2)
Premium & 73(2)
(e) free reserves Sec 73(2)
without
complying s.
73(2)(a) to (e)
 CA. Pramod Jain
PURPOSE OF FORM – PARA 4
1. Onetime Return for disclosure of details of
outstanding money or loan received by a
company but not considered as deposits in
terms of rule 2(1)(c) of Companies
(Acceptance of Deposits) Rules
2. Return of Deposit
3. Particulars of transactions by a company not
considered as deposit as per rule 2 (1) (c) of
Companies (Acceptance of Deposit) Rules
4. Return of Deposit & Particulars of transactions
by a company not considered as deposit
 CA. Pramod Jain
ISSUES??
Bank CC / OD balances??
Balance as per books – Rs. 1800000/-
Balance as per bank statement – Rs.
1500000/-
Which amount to be disclosed in DPT-3?
DPT-3 – 18 L
Auditor Certificate (when required) - mention
both
 CA. Pramod Jain
ISSUES??
 Unsecured Loan from Director??
 Loan Taken on 1.4.2012 – Rs. 1000000/-
 Loan Repaid on 1.4.2018 – Rs. 500000/-
 Interest (Net of TDS) as on 31.3.2020 – Rs.
100000/-
 Outstanding balance as on 31.3.2020 – Rs.
600000/-
 DPT - 3 - Rs. 600000/-
 Auditor Certificate (if required) – Outstanding amount
includes interest provided less TDS
 CA. Pramod Jain
ISSUES??
 Unsecured Loan from Director’s HUF
 How to disclose in DPT-3?
 One Time – Not allowed
 Annual - mention in outstanding from director’s
relatives
 Auditor Certificate (when required) – Outstanding
amount from director’s relative includes
outstanding loan from director’s HUF including
interest provided less TDS
 CA. Pramod Jain
ISSUES??
 Loan received from shareholder on
1.4.2013 Rs. 200000/-
 No further amount received

 What to disclose in one time and

annual return
 DPT-3 – Nil
 Auditor Certificate (when required) – mention
received from shareholders prior to 1.4.2014
 CA. Pramod Jain
DPT-3 - SUMMARY
 NIL DPT-3 Not required
 Every company receiving monies and having
outstanding as on year end to file DPT-3:
 One time Return – by 29th June 2019
Outstanding amounts as on 31.3.2019 for NOT
DEPOSITS AND which are received after 1.4.2014
 Annually – by 30th June every year

Outstanding amounts as on 31.3.2020 which are

deposits or not deposits.. Irrespective of date of
receipt
 Non- Comp. Fine–5K-continuing Rs. 500 pd R. 21
 CA. Pramod Jain

AUDIT

Information
Certificate
as per MCA

Exempt Rule 16 MCA Rule 16A

Deposits
Deposits Annual Annual One time

Only for Not

Audited Unaudited Mandatory
Deposits
Financials Financials for Annual
i.e 2 & 4 Required
 CA. Pramod Jain
INFORMATION
 Date of last closing of accounts – as on last year
end i.e 31st March 2020
 Latest audited financials – 31st March 2019

 Net Worth as per latest audited balance sheet

preceding the date of the return – March 2019
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