Compliance News

Company Law Update

1. Maintenance of Books of Accounts by a company

As per the relevant provisions of the Companies Act 2013, every company is required to maintain its books of account and other relevant books and papers in electronic mode in India. Ministry of Corporate Affairs (MCA) vide Notification No. G.S.R 624(E) dated 5 August 2022, has provided further requirements for maintenance of such books of accounts in electronic form. Pursuant to the said notification, every company is required to maintain the books of accounts in electronic form accessible in India at all times. Further, the accounting software used in maintenance of books of accounts  for the financial year commencing on or after April, 2023 shall have a feature of recording audit trail of each transaction and creating an edit log of each change made in books of account along with the date of such changes. 

2. Amendment in eligibility of Small Company

As per the relevant provisions of the Companies Act 2013, a company with paid up capital and turnover not exceeding INR 2 crores and INR 20 crores respectively was referred to as a small company. MCA vide notification no. G.S.R. 700(E) dated 15 September 2022 has amended the definition of small company, pursuant to which now a company with paid up capital and turnover not exceeding INR 4 crores and INR 40 crores respectively was referred to as a small company.

3. Extension of timelines for forms pertaining to KYC of directors

Pursuant to the relevant provisions of every director of a company is required to fill Form DIR 3 KYC (KYC of the Director) every year. MCA vide notification no. G.S.R. 662(E) dated 29 August 2022 has amended the format of the Form DIR 3 KYC and Form DIR 3 KYC WEB.

Further, MCA vide general circular (no. 09/2022) dated 28 September 2022 has extended the timeline for filling of form DIR 3 KYC and DIR 3 KYC WEB for financial year 2022-23 from 30 September 2022 to 15 October 2022.

4. Amount spent on campaign of 'Har Ghar Tiranga' to be considered as CSR activity

As per the relevant provisions of Companies Act 2013, certain eligible companies are mandated to conduct yearly CSR (Corporate Social Responsibility) activities. In this regard, MCA, vide general circular No 08/2022 dated 26 July 2022 issued a clarification that the amount spent by such eligible companies in the recent Independence day campaign of "Har Ghar Tiranga- Azadi ka amrit mahotsav" will now be qualified as a CSR activity under item no. (ii) of Schedule VII of the Companies Act, 2013 pertaining to the promotion of education relating to culture.

Company Secretarial (CS) compliance for Private Limited Companies

Below is the summary of the compliances which need to be adhered to in the next quarter :

(July – September 2022)

Updates by the Ministry of Labour and Employment

1. A circular released by Employees' Provident Fund Organisation(EPFO) on withdrawal of prosecution cases related to non-submission of KYC documents of covered employees

Employees’ Provident fund Organisation(“EPFO”) vide circular dated 6 September 2022 has authorized the Regional Provident Fund Commissioners (“RPFC”) to consider application for withdrawal of prosecutions against the employers related to non-filing/ non- submission of KYC documents(s) of the employees covered under the Employees’ Provident Fund Scheme. This is against the background that the employers had previously  faced technical issues in depositing the employees’ provident fund contributions on the grounds of employees failing to link their respective Universal Account Number with Aadhaar Number etc. It is imperative to note that for withdrawal of such prosecutions, the request must come from the employer by filing an application before the RPFC/Competent. Further, subsequent to filing of the application the employer will be required to comply with necessary compliances in respect of the statutory provisions for filing of KYC documents in respect of the concerned employers also in this regard, the employer shall be required to submit an undertaking to comply with such statutory provisions regarding submission of KYC documents in future.  It has also been clarified by the EPFO that the cost of legal and other expenses during such prosecution should not be demanded. 

2. EPFO has proposed to remove the wage ceiling and head count limit to be covered under the Employees' Provident Fund Scheme

It is pertinent to note that recently EPFO has proposed the removal of wage ceiling and the head count of employees for the purpose of applicability and coverage under the Employees' Provident Funds and Miscellaneous Provisions, Act, 1952("EPF"). The possible intent behind this proposed idea is to cover all formal workers and self-employed people under the Indian social security. Currently, the compulsory wage limit in respect of employees for the purpose of coverage under the EPF Act is INR 15,000/- per month and the EPF Act is applicable to all factories and establishments having 20 or more workers/employees. 

3. Standard Operational Procedure (SOP) to settle claims in cases of death due to industrial accidents

The Employees' Provident Fund (EPF) Organization through circular (no. GJ/AHD/EPF/RPFC-II) dated 3 August 2022 has issued the SOP to settle claims for death due to industrial accidents as a top priority. The SOP has provided certain social security benefits to the family members of the deceased, such as, the widow/ widower of the deceased employee/ personnel shall receive a monthly family pension as per the provisions of Employee Penson Scheme till death or re-marriage of such widow/ widower. Further, a monthly children pension shall also be provided to upto two (2) children of the decease till 25 years of age. 

4. Online application for exemption under the provisions of Delhi Shops and Establishment Act 1954

As per the relevant provisions of Delhi Shops and Establishment Act 1954, establishments are required to seek for certain exemptions such as : allowing young persons and women to work night shifts, allowing change in working hours, allowing opening of shops/ establishment on week off day or on the national holidays of India. The Government of Delhi vide office order dated 05 August 2022, has eased the application for seeking the above-mentioned exemptions by allowing shops and establishments to make online applications at the portal:-Shop Establishment (delhi.gov.in). The online application portal is effective from 8 August 2022. 

Updates by the Reserve Bank of India (RBI)

1. International Trade Settlement in INR

The RBI vide circular (no. RBI/2022-2023/90) dated 11 July 2022 has prescribed for settlement of import/ export in Indian Rupee (INR). For the purpose of trade settlement in INR between a foreign party and an Indian Party, the bank of the foreign party will be required to open a special INR vostro account in the bank of the Indian party. Please note that in case an Indian company/ person intends to avail this mechanism, the bank of such Indian party is required to seek a prior approval from RBI to open the above-mentioned special INR vostro account. 

2. Increase in availing automatic route ECB limit to USD 1.5 Billion or equivalent

As per the prescribed provisions of RBI, an India entity may raise up to USD 750 Million (or equivalent) amount of External Commercial Borrowing (ECB) under automatic route. However, pursuant to RBI's notification (no. RBI/2022-23/98) dated 1 August 2022, Indian entity borrowers may now raise an ECB till USD 1.5 Billion (or equivalent) under automatic route till 31 December 2022.

3. Introduction of laws pertaining to Overseas Investment

The Ministry of Finance and RBI vide notifications (no. RBI/2022-2023/110) and (no. FEMA 400/2022-RB) dated 22 August 2022, have prescribed new regulatory regime pertaining to the Overseas Investment by an Indian entity. Pursuant to the new regime, Foreign Exchange Management (Overseas Investment) Rules 2022 and , Foreign Exchange Management (Overseas Investment) Regulations 2022 have been introduced while suppressing the existing Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations 2004 and Foreign Exchange Management (Acquisition and Transfer of Immovable Property Outside India) Regulations 2015. Indian Companies intending to make overseas investment in a foreign company are advised to take note of the new overseas investment regime.