Introduction
On 27.10.2023, the Ministry of Corporate Affairs (‘MCA’) rolled out a notification[i] introducing significant amendments to the Companies (Management and Administration) Rules, 2014 (‘Rules’). The key amendment mandates every company to designate a person with the responsibility of furnishing information to the Registrar of Companies (‘ROC’) or any duly authorized officer about the beneficial interests held in the company's shares. This requirement is intended to improve transparency and accountability in corporate governance. Ss. 89 and 90 of the Companies Act, 2013, (‘Act’) intricately articulate the stipulations pertaining to beneficial interest, signifying the gravity and legality of this regulatory measure.
Key Provisions of the Amended Rules
I. Short title and Commencement:
The newly enacted rules will be called the Companies (Management and Administration) Second Amendment Rules, 2023. These rules shall come into effect upon their publication in the official gazette, thereby ensuring a swift and efficient implementation process.
II. Introduction of New Provisions in accordance with the Amended Rules:
This notification has made additions to r. 9 of the Rules, thereby introducing r. 9(4) to (8). These are as follows:
R. 9(4) mandates every company to have a designated person who will be responsible for providing information to the ROC or any authorized officer regarding beneficial interests in the company’s shares.
R. 9(5) states that the following persons may be designated to fulfil the aforesaid requirement:
a) Company secretary (‘CS’), if required to be appointed under the Act, or any other key managerial personnel (‘KMP’),
b) Each director, if there is no CS or KMP.
R. 9(6) lays down the provision of deemed designation where, until a company appoints a designated person, the following persons can be deemed to be the designated person:
a) CS, if required to be appointed under the Act,
b) Each managing director (‘MD’) or manager, in case no CS is appointed,
c) Each director, if there is no CS, MD, or manager.
R. 9(7) mandates that every company is required to disclose the details of the designated person in its annual return, ensuring compliance with the ROC.
R. 9(8) mandates the submission of e-Form GNL-2, as per the Companies (Registration Offices and Fees) Rules, 2014, if a company decides to change its designated person at any time.
Conclusion
The Indian government has issued this notification, making significant changes to the rules. One of the major changes is that all companies must now appoint a person to be responsible for reporting who owns the company's shares. The Rules were previously amended and last amended on 21.01.2023.
This rule's flexibility allows its application across diverse company structures, and the requirement for annual disclosure keeps the ROC informed about any shifts in beneficial interests. The result is a corporate landscape marked by enhanced compliance, transparency, and good governance practices. It is a transformative era where compliance and integrity take centre stage, ensuring corporate governance is upheld with unwavering diligence.
End Notes:
[i] Notification No. G.S.R. 801(E) dated 27.10.2023.
*Authored by Aishwarya Pawar, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion. *
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