Nexdigm is an employee-owned, privately held, independent global organization that helps companies across geographies meet the needs of a dynamic business environment. Our focus on problem-solving, supported by our multifunctional expertise enables us to provide customized solutions for our clients.
The Ministry of Corporate Affairs (MCA) notified certain
amendments to rules by separate notifications dated 27 October
2023. The MCA notified the following amendment rules in pursuance
of the said notifications:
The Companies (Management and Administration) Second Amendment
Rules, 2023 (MA Rules); and
The Companies (Prospectus and Allotment of Securities) Second
Amendment Rules, 2023 (PAS Rules).
We have summarized the key amendments in the table below:
Particulars
Key Amendments
MA Rules
Every company shall designate a person who shall be responsible
for furnishing and extending cooperation for providing information
to the Registrar or any other authorized officer with respect to a
beneficial interest in shares of the company.
A company may designate:
a company secretary (if it is required to have); or
a key managerial personnel (other than company secretary)'
or
every Director if there is no company secretary or key
managerial personnel.
Until a company designates persons specifically as aforesaid,
the above-mentioned person shall be deemed as a designated person
in order of priority.
The details of designated persons shall be informed in the
annual return of a company.
The change in designated person shall be intimated in e-form
GNL-2 to the Registrar.
PAS Rules
This requires every company that has issued share warrants
before the commencement of the Companies Act, 2013 and not
converted into shares to inform the Registrar about the details of
such share warrants in Form PAS-7 within three months from the
commencement of the said rules.
This requires the bearers of the share warrants to surrender
such warrants to the company and get the shares dematerialized in
their account within a period of six months of the commencement of
the said rules.
This requires a company to place a notice for the bearers of
share warrants in Form PAS-8 on the website of the company, if any
and shall also publish the same in newspapers.
In case the bearer of share warrants does not surrender such
warrants within the stipulated time, then a company needs to
convert them into dematerialized shares and transfer them to the
Investor Education and Protection Fund.
This mandates every private limited company (other than small
companies) to issue the securities only in dematerialized form and
facilitate the dematerialization of all its securities.
A private company referred to above is mandated to comply with
the dematerialization provision within 18 months from 1 April
2023.
After period of 18 months given for compliance, any such
private company making any offer for the issue of any securities or
buyback of securities or issue of bonus shares or rights offer
shall ensure that before making such offer, the entire holding of
securities of its promoters, directors, key managerial personnel
has been dematerialized.
Every holder of securities of such private company (after
completion of the aforesaid timeline):
is required to get securities dematerialized before its
transfer;
who subscribes to securities issued by such private company
shall ensure that all his securities are held in dematerialized
form before such subscription.
Our Comments
The companies are required to report beneficial ownership to the
Registrar. The MA Rules brought a corollary change pursuant to
which a person is required to be designated who shall be
responsible for furnishing extending cooperation for providing
information to the Registrar.
In a major overhaul impacting private companies (other than
small companies), the PAS Rules mandate every such private company
to dematerialize its securities. It also requires surrendering the
share warrants issued before the commencement of the Companies Act,
2013 and not converting into shares to convert into dematerialized
securities.
The changes pertaining to the designated person seem to have
been introduced to streamline the existing process and empower the
Registrar to seek information from such a person. The mandate to
dematerialize the securities by private companies would regulate
the issue, transfer and buyback of securities in a fair manner.
That would also minimize the disputes concerning the issue and
transfer of shares, which are abused many times due to the physical
nature of shares. However, given the nature of compliance
requirements, stakeholders are more likely to feel it as a
compliance burden and not as a means to facilitate ease of doing
business.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
