corporate updates may 2011

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TABLE OF CONTENTS

PAGE NO.

CORPORATE AFFAIRS

Limits Enhanced for obtaining approval of the Central Government for payment of remuneration to office or place of profit

Limits Enhanced For Disclosure of Particulars of Employees Under Section 217(2A) of Companies Act, 1956

Green Initiatives in Corporate Sector - Clarification regarding service of documents by e-mode instead of Under Posting certificate (UPC)

Simplified Procedure for amalgamation of Government Companies U/s 396 of the Companies Act, 1956

Procedure for appointment of Cost Auditor by Companies reviewed

Certification of e-forms under the Companies Act, 1956 by the Practicing professionals

Informing PAN through DIN

Filing of Balance Sheet and profit and Loss Account in XBRL mode.

Word “partnership” in ICAI, ICWAI, ICSI Acts include LLPs

TAXATION

Finance Act 2011 to be effective from 1st of May 2011

Government withdraws exemption on service provided by CS, CA, CWA related to representation of client before any statutory authority

Procedure for regulating refund of excess amount of TDS deducted and/or paid

Amendments in service tax

Government to issue biometric PAN card

Central Board of Excise and Customs determines rate of exchange of conversion

RBI / FEMA

Foreign investments in India by SEBI registered FIIs in other securities

Advance Remittance for Import of Goods – Liberalization

SEBI

ASBA made compulsory for non-retail investors

SEBI Reviews Annual Issuers’ Charges

ICSI

Amendments in the Company Secretaries Act, 1980 & the Rules and Regulations made thereunder

Electoral reforms

National Conference of Practising Company Secretaries

OTHERS

Companies not to pay stamp duty on increased capital – High Court, DELHI

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Limits enhanced for obtaining approval of the Central Government for payment of

remuneration to office or place of profit

The Ministry of Corporate Affairs has notified (vide F.No. 17/75/2011-CL.V dated 6th April 2011)

enhancement in previous limit of Rs. 50,000/- per month given under Rule 3 of Director’s Relative

(Office or Place of Profit) Rules, 2003 to Rs. 2,50,000/- per month for payment remuneration to

relatives or partners of the directors of the Company falling under Section 314(1B) of the Companies

Act 1956. The amended rules may be called as Director’s Relative (Office or Place of Profit)

Amendment Rules, 2011.

The effect of notification shall require Companies to obtain prior consent of the Company by a Special

Resolution and approval of the Central Government under Section 314(1B) of the Companies Act

1956 read with Director’s Relative (Office or Place of Profit) Amendment Rules, 2011, with respect to

appointment of relatives or partners of the directors of the Company falling under Section 314(1B) of

the Companies Act 1956 to any office or place of profit which carries a monthly remuneration

exceeding Rs. Two lakh fifty thousand per month.

The notification also redefined the constitution of Selection Committee under Rule 7 of Director’s

Relative (Office or Place of Profit) Amendment Rules, 2011 for purpose of appointment of persons

mentioned under Section 314 (1B) of the Act.

Limits Enhanced For Disclosure of Particulars of Employees Under Section 217(2A) Of Companies Act, 1956

The Ministry of Corporate Affairs has vide Notification F.No. 2/29/1998-CL.V dated 31st March 2011

enhanced the limits for the purpose of disclosure of particulars of employees in Directors Report as

requisite under Section 217 (2A) read with Companies (Particulars of Employees) Rules, 1975 from

the existing limit of Rs. 24 lakh per year or Rs. 2 lakh per month to Rs. 60 lakh per year or Rs. 5 lakh

per month and by such notification also covers Government Companies for such disclosures. The

amended rules may be called as Companies (Particulars of Employees) Amendment Rules, 2011.

The effect of the notification shall require the Companies including Government Companies to include

a statement showing the name of every specified employee of the Company in their Board Report

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pursuant to Section 217 (2A) of the Companies Act 1956 read with Companies (Particulars of

Employees) Amendment Rules, 2011 which provides:

a) If employed throughout the financial year, was in receipt of remuneration for that year which, in

aggregate, was not less than Rs. Sixty Lakh for the year: or

b) If employed for a part of the financial year, was in receipt of remuneration for any part, of that year, at a

rate which, in the aggregate was not less Rs. Five Lakh per month.

Green Initiatives in Corporate Sector - clarification regarding service of documents by e-mode instead of Under certificate of Posting (UCP)

The Ministry of Corporate Affairs (vide Circular No. 17/2011) has taken a “Green Initiative in the

Corporate Governance” by allowing paperless compliances by the Companies after considering

sections 2, 4, 5, and 81 of the Information Technology Act, 2000 for legal validity of compliances

under Companies Act through electronic mode.

As per the circular a company would have complied with Section 53 of the Companies Act, if the

service of document has been made through electronic mode.

Further, vide Circular No. 18/2011, Dated: 29.4.2011 MCA clarified that the company would be in

compliance of sections 219(1) of Companies Act, 1956, in case, a copy of Balance Sheet etc., is sent

by electronic mail to its member subject to the fact that company has obtained:

a) E-mail address of its member for sending the Annual report through e-mail, after giving an advance

opportunity to the member to register his e-mail address and changes therein from time to time with the

company or with the concerned depository.

b) Company’s website display full text of these documents well in advance prior to mandatory period and

issue advertisement in prominent newspapers in both vernacular and English stating that the copies of

aforesaid documents are available in the website and for inspection at the Registered Office of the

company during office hours.

c) In cases where any member(s) has not registered his e-mail address for receiving the Balance Sheet etc

through e-mail, the Balance Sheet etc., will be sent by other modes of services as provided under

section 53 of the Companies Act, 1956.

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d) In case any member(s) insist for physical copies of above documents, the same should be sent to him

physically, by post free of cost.

Simplified Procedure for amalgamation of Government Companies U/s 396 of the Companies Act, 1956

The Ministry of Corporate Affairs has vide General Circular No. 16/2011 dated April 21, 2011 decided

that, in appropriate cases, simpler procedures shall be adopted for the amalgamation of Government

Companies under section 396 of the Companies Act, 1956.

Every Central Government Company which is applying to the Central Government for amalgamation

with any other Government Company or Companies under the simplified procedure prescribed in this

circular, shall obtain approval of the Cabinet i.e. Union Council of Ministers to the effect that the

proposed amalgamation is essential in the ‘public interest’.

In the case of State government companies, the approval of the State Council of Ministers would be

required.

Where both central and state government companies are involved, approval of both State Cabinet(s)

and Central Cabinet shall be necessary.

Procedure for appointment of Cost Auditor by Companies reviewed

MCA has vide General Circular No. 15/2011 reviewed the existing procedure followed by the

companies for seeking prior approval of the Central Government for appointment of cost auditor

under section 233B (2) of the Companies Act, 1956. As per the circular, the appointment of cost

auditor needs to be first considered by the Audit Committee and upon the recommendation of the

audit committee Board can make the appointment of Cost Auditor.

The Company shall file the application regarding the appointment of Cost Auditor in Form-23C within

90 days from the commencement of financial year. On filing of the application, the same shall be

deemed to be approved by the Central Government, unless contrary is heard within thirty days from

the date of filing of such application.

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Certification of e-forms under the Companies Act, 1956 by the Practicing professionals Ministry of Corporate Affairs has vide General Circular No. 14/2011 entrusted the responsibility on

practicing professionals registered as Members of the professional bodies namely, ICSI, ICAI &

ICWAI for submitting documents / certifying eforms (to be signed digitally by them) to be filed with

MCA and system would accept most of these documents online without approval by Registrar of

Companies or other officers of the MCA.

In case of wrong submissions, professionals concerned could face debarment of 30 days or till the

final enquiry report is received from the respective professional Institute by the ministry.

Informing PAN through DIN

Ministry of Corporate Affairs vide Circular No.11/2011 dated 07.04.2011 informed that the Directors

who have not furnished their PAN earlier at the time of obtaining DIN are required to furnish their PAN

by filing eform DIN-4 (Intimation of change in particulars of Director to be given to the Central

Government) on or before 31st May, 2011.

Filing of Balance Sheet and Profit and Loss Account in XBRL mode

The Ministry of Corporate Affairs vide General Circular No. 09/2011 mandates certain class of

companies to file balance sheets and profit and loss account for the year 2010-11 onwards by using

XBRL taxonomy. XBRL is a language for the electronic communication of business and financial data

which is revolutionizing business reporting around the world. The Financial Statements required to be

filed in XBRL format would be based upon the Taxonomy on XBRL developed for the existing

Schedule VI, as per the existing, (non converged) Accounting Standards notified under the

Companies (Accounting Standards) Rules, 2006.

In phase I the following class of companies have to file the Financial Statements in XBRL Form only

from the year 2010-2011:

a. All companies listed in India and their subsidiaries, including overseas subsidiaries;

b. All companies having a paid up capital of Rs. 5 Crore and above or a Turnover of Rs. 100 crore or

above .

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Word “partnership” in ICSI, ICAI, ICWAI Acts include LLPs

The Acts governing the three professional Institutes ICSI, ICAI and ICWAI define in Section 2

members who are deemed to be in practice. In all the three Acts, there is a provision for a member to

be in practice when he is in partnership with certain others. At the time of enactment of the three Acts

governing the professional Institutes, only one form of partnership existed in India, namely

Partnerships under Indian Partnership Act, 1932. Subsequently, Parliament has enacted the Limited

Liability Partnerships Act, 2008.

MCA, vide General Circular No. 10/2011 dated 04.04.2011 clarified that though Limited Liability

Partnerships are bodies corporate under Section 3(i) of the LLP Act, the fact that LLPs are basically

partnerships may be seen from the definition in Section 2(i) (n) of the LLP act. Thus, a Limited

Liability Partnership is also a partnership and its members are also partners. Accordingly, it is also

made clear that the words “partnership” wherever occurring in the Chartered Accountants Act, 1949,

the Cost and Works Accountants Act, 1959 and the Company Secretaries Act, 1980 shall mutatis

mutandis be construed as including those Limited Liability Partnerships where all the other partners

are natural persons(individuals). The word “partner” shall also be construed accordingly.

Finance Act 2011 to be effective from 1st of May 2011

Central Government through its Notification No. 29/2011 appoints the 1st day of May 2011, as the

date on which the provisions of the Finance Act 2011 shall come into force.

Government withdraws exemption on service provided by CS, CA, CWA related to representation of client before any statutory authority

The Ministry of Finance vide Notification No.32/2011-ST has rescinded the earlier Notification (No.

25/2006) dated 13th July 2006 which exempted the levy on service tax with respect to services

provided or to be provided by a practicing company secretary, a practicing chartered accountant and

a practicing cost accountant respectively, in his professional capacity, to a client, relating to

representing the client before any statutory authority in the course of proceedings initiated under any

law for the time being in force.

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Procedure for regulating refund of excess amount of TDS deducted and/or paid

In supersession of the Circular No. 285, dated 21-10-1980, the Central Board of Excise and Customs

vide Circular No. 2/2011 dated 27-4-2011 prescribes the new procedure for regulating refund of

amount paid in excess of tax deducted and/or deductible in respect of TDS on residents covered

under sections 192 to 194LA of the Income-tax Act, 1961.

Consequent to this circular, the excess payment to be refunded would be the difference between:

a. the actual payment made by the deductor to the credit of the Central Government; and

b. the tax deductible at source.

In case such excess payment is discovered by the deductor during the financial year concerned, the

present system permits credit of the excess payment in the quarterly statement of TDS of the next

quarter during the financial year.

In case, the detection of such excess amount is made beyond the financial year concerned, such

claim can be made to the Assessing Officer (TDS) concerned. However no claim of refund can be

made after two years from the end of financial year in which tax was deductible at source.

This circular will not be applicable to TDS on non-residents falling under sections 192, 194E and 195

which are covered by circular No. 7/2007 issued by the Board.

Amendments in service tax

a. Services provided by a Restaurant

An exemption @ 70% of the gross value i.e. the total price charged by the restaurant has been

given by amending the notification No. 1/2006-ST, dated 1-3-2006 vide Notification No.

34/2011-ST, dated April 25, 2011. The exemption is available provided no Cenvat credit is

availed either of inputs or input services. It is clarified that the exemption is available on the

gross price charged by the restaurant for the taxable service, including any portion shown

separately e.g. service charge. However the amount paid by the customer ex gratia e.g. as tip to

any member of the staff doesn't constitute consideration paid to the restaurant and shall remain

outside this levy.

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b. Short Term Accommodation

In accordance with the budget announcement, the levy will be applicable on short-term

accommodation with a declared tariff of Rs. 1,000 per day or above. A suitable exemption has

been given below this amount vide Notification No. 31/2011-ST, dated April 25, 2011. Declared

tariff has been defined within the notification as charges for all amenities provided in the unit of

accommodation.

Thus it will include cost of all electronic gadgets installed in the room and any other facility

normally provided by a hotel as part of the stay. Cost of extra bed will not form a part of the

declared tariff. No further exclusions are provided from the declared tariff e.g. on account of

breakfast or any other meal whose cost is included in the declared tariff including any discount

given to the customer. However an exemption @ 50% has been given by amending the

notification No. 1/2006-ST, dated 1-3-2006 vide notification No. 34/2011-ST, dated April 25,

2011 provided no Cenvat credit is availed either of inputs or input services.

c. Life Insurance Services

The new definition will include all services provided by a life insurance company. The optional

scheme available in rule 6(7A) of the Service Tax Rules, 1994 has been amended vide

notification No. 35/2011-ST, dated April 25, 2011. The assessee will have the option to pay tax

on that portion of the premium which is not invested, when such break-up is given to the

policyholder. Where the break-up is not so provided, tax amount shall be 1.5% of the gross

premium. However, where the entire premium is only for the risk portion the same shall

constitute the taxable value of the service.

d. Health Services

The new levy on medical services in terms of sub-clause (zzzzo) of section 65(105) has been

exempted vide notification No. 30/2011-ST, dated April 25, 2011. It may be noted that the earlier

levy on certain services provided by hospitals imposed last year was substituted by the new

entry. Thus the levy imposed last year will not be applicable anymore.

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e. Commercial Coaching and Training

The revised definition is intended to bring into the tax net all unrecognized education within its

ambit irrespective of the fact whether the institute imparting the education is conducting any one

or more course recognized by law. Accordingly, an exemption has been given to pre-school

education and all education that leads to the award of a qualification recognized by law vide

notification No. 33/2011-ST, dated April 25, 2011.

f. Assistance provided for processing visa applications

Central Board of Excise and Customs (CBEC) vide Circular No. 137/6/ 2011-ST clarified that

Visa facilitators, while providing visa assistance directly to individuals do not act on behalf of the

embassies as agents of the principal and hence service tax is not leviable within the meaning of

business auxiliary service. However, it said, service tax is leviable on any other services

provided directly to individuals for obtaining visa would attract the levy.

Government to issue biometric PAN card

The government has decided to issue biometric PAN cards to taxpayers across the country to weed

out the duplicate and fake ones. The proposed new biometric Permanent Account Number (PAN)

cards would bear the I-T assessee’ fingerprints (two from each hand) and the face. There could be an

option to existing PAN card holders to opt for the biometric cards, but it may not be mandatory.

The biometric PAN card was proposed in 2006 by the then Finance Minister P Chidambaram to

counter the problem of duplicate PAN cards uncovered during I-T searches and raids by police and

other enforcement agencies. The CAG report on direct taxes for 2010-11, tabled in Parliament

recently, has revealed that 95.8 million PANs were issued till March 2010 but I-T returns filed in the

last financial year were only 34.09 million. According to CAG, the gap between PAN holders and the

number of returns filed was 61.7 million.

Central Board of Excise and Customs determines rate of exchange of conversion:

The CBEC through its Notification No.32/2011 - Customs (N.T.) determines that the rate of exchange

of conversion of each of the foreign currency specified in column (2) of each of Schedule I

and Schedule II annexed hereto into Indian currency or vice versa shall, with effect from 1st May,

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2011 be the rate mentioned against it in the corresponding entry in column (3) thereof, for the

imported and export goods.

SCHEDULE-I

S.No.

(1)

Foreign Currency

(2)

Rate of exchange of one unit of foreign currency equivalent to Indian rupees

(3)

(For Imported Goods) (For Export Goods)

1. Australian Dollar 48.25 47.05

2. Canadian Dollar 47.35 46.15

3. Danish Kroner 8.85 8.55

4. EURO 65.65 64.05

5. Hong Kong Dollar 5.80 5.70

6. Norwegian Kroner 8.45 8.15

7. Pound Sterling 74.35 72.55

8. Swedish Kroner 7.40 7.15

9. Swiss Franc 51.25 49.75

10. Singapore Dollar 36.50 35.60

11. US Dollar 45.00 44.15

SCHEDULE-II

S.No.

(1)

Foreign Currency

(2)

Rate of exchange of 100 units of foreign currency equivalent to Indian rupees

(3)

(For Imported Goods) (For Export Goods)

1. Japanese Yen 55.40 53.85

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Foreign investments in India by SEBI registered FIIs in other securities

The Reserve Bank of India vide A.P. (DIR Series) Circular No. 55 dated April 29, 2011 decided to enhance the

FII investment limit in listed non-convertible debentures / bonds, with a residual maturity of five years

and above, and issued by Indian companies in the infrastructure sector by an additional limit of USD

20 billion taking this limit from USD 5 billion to USD 25 billion (with this the total limit available to FIIs

for investment in listed non convertible debentures / bonds would be USD 40 billion with a sub limit of

USD 25 billion for investment in listed non-convertible debentures / bonds issued by corporates in the

infrastructure sector). Further, such investment by FIIs in listed non-convertible debentures / bonds

would have a minimum lock-in period of three years.

However, FIIs are allowed to trade amongst themselves during the lock-in period. It has also been

decided to allow SEBI registered FIIs to invest in unlisted non-convertible debentures / bonds issued

by corporates in the infrastructure sector, provided that such investment is as per the aforementioned

terms and conditions.

Advance Remittance for Import of Goods – Liberalization

At present under the provisions of Foreign Exchange Management Act, 1999 the AD Category – I

banks are required to obtain an unconditional, irrevocable standby Letter of Credit (LC) or a

guarantee from an international bank of repute situated outside India or a guarantee of an AD

Category – I bank in India, if such a guarantee is issued against the counter guarantee of an

international bank of repute situated outside India, for an advance remittance exceeding USD

100,000 or its equivalent in regard to import of goods.

With a view to liberalising the procedure, the RBI vide circular A.P. (DIR Series) Circular No. 56 dated

April 29, 2011 decided to enhance the aforesaid limit of USD 100,000 to USD 200,000 or its

equivalent, with immediate effect for importers (other than a Public Sector Company or a

Department/Undertaking of Central/State Governments where the requirement of bank guarantee is

to be specifically waived by the Ministry of Finance, Government of India for advance remittances

exceeding USD 100,000 or its equivalent).

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ASBA made compulsory for non-retail investors

The SEBI vide CIR/CFD/DIL/1/2011 dated April 29, 2011 has made ASBA (Applications Supported by

Blocked Amount) facility mandatory for all non-retail investors (HNIs and institutional investors)

investing in public and rights issues.

As per the circular, disclosures shall be made in this regard in the offer document such as in issue

procedure section as part of payment instructions.

The circular also said that syndicate and sub-syndicate members belonging to the cities of Mumbai,

Chennai, Kolkata, Delhi, Ahmedabad, Rajkot, Jaipur, Bangalore, Hyderabad, Pune, Baroda and Surat

are allowed to obtain and upload ASBA forms.

SEBI has asked merchant bankers to ensure that appropriate disclosures are made in the offer

document in this regard. All intermediaries have been directed to comply with the instructions in the

circular that shall be applicable for offer documents filed with the ROC for public issues and

exchanges for rights issues on or after May 2, 2011.

SEBI Reviews Annual Issuers’ Charges

The Securities and Exchange Board of India vide Circular No. CIR/MRD/DP/05/2011 dated April 27,

2011 decided to modify the methodology of calculating the Annual Issuers charges. The annual

issuer charges would be based on the average no. of folios (ISIN positions) during the previous

financial year instead of the total number of folios (ISIN positions) as on 31st March of the previous

financial year.

The average no. of folios (ISIN positions) for an Issuer may be arrived at by dividing the total number

of folios for the entire financial year by the total number of working days in the said financial year.

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Amendments in the Company Secretaries Act, 1980 & the Rules and Regulations made thereunder

With a view to harmonize the Company Secretaries regulations with the changing dynamics of

regulatory environment, the Council of the Institute at its 200th meeting held on 18th March, 2011 has

constituted the ‘Regulations Committee’ to examine the provisions of the Company Secretaries Act,

1980, Rules made thereunder by the Central Government, the Company Secretaries Regulations,

1982. Members are also requested to send suggestions/ comments for amendments in the Company

Secretaries Act, 1980 & the Rules and Regulations made thereunder for consideration of the

Committee on or before 10th May, 2011 on e-mail IDs [email protected] and

[email protected].

Electoral Reforms

During the course of Elections, it was felt by some of the contesting candidates and members of the

Institute that the provisions of the aforesaid Rules, Act, Regulations, Chapter Guidelines and other

applicable provisions if any, pertaining to Elections needed to be examined for reforms in the Election

process.

The Council of the Institute at its 200th meeting held on 18th March, 2011 considered the matter and

constituted Elections ‘Reforms Committee’ for suggesting reforms in the Elections to the Council/

Regional Councils/ Chapters of the Institute. Members are also requested to send their suggestions/

comments on the Election reforms for consideration of the Committee on or before 10th May, 2011 on

e-mail IDs [email protected] and [email protected].

National Conference of Practising Company Secretaries The 12th National Conference of Practising Company Secretaries will be held on July 14-15-16, 2011

at Ooty, Tamilnadu. The Theme of the conference is ‘PCS: Strategic Options in the New Decade’.

The Conference will focus on Capital market and opportunities for Practising Company Secretaries,

FEMA, Foreign Direct Investment, External Commercial Borrowings, Emerging opportunities in other

laws with emphasis on SMEs, Opportunities for appearance before various tribunals / quasi judicial

authorities, Core legislations and emerging role of PCS which would include Secretarial Audit,

insolvency practice, valuation, etc., professionals’ role in respect of Code of Conduct and ethical

practice; Corporate Governance, CSR and Business Sustainability.

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Companies not to pay stamp duty on increased capital – High Court, DELHI

The Delhi High Court has held that a company is not required to pay the stamp duty on the increased

amount of its authorized share capital. A bench headed by Justice S Muralidhar said this while

allowing the plea of S. E. Investments Ltd., which challenged the direction of the Registrar of

Companies (ROC) seeking stamp duty on increased amount in authorized share capital.

The court, however, made it clear that the company would not be entitled to refund of the amount

which it had already paid as stamp duty.

- CORPORATE UPDATES TEAM

Disclaimer: The above information is only indicative and solely for informational purpose and private circulation. RANJ &

Associates, Company Secretaries intend to, but do not guarantee or promise that it is correct, complete / up-to-date. We

expressly disclaim any liability to any person in respect of anything, and of consequences of anything done, or omitted to be

done by any such person in reliance upon the contents of this document.

The information in this document is as of April 30, 2011.

corporate updates may 2011

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