Come April 2020, Pvt. Cos. having a paid up share capital of Rs.10 crs will be required to appoint whole-time company secretary; Secretarial Audit must for every company having outstanding loans of Rs. 100 crs or more

Come April 2020, Pvt. Cos. having a paid up share capital of Rs.10 crs will be required to appoint whole-time company secretary; Secretarial Audit must for every company having outstanding loans of Rs. 100 crs or more

January 8, 2020 CORP, Industries, states 0

In a Notification dated 3rd January, 2020, the Ministry of Corporate Affairs has issued the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2020 (“Amendment Rules”) to amend the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (“Principal Rules”).

The Amendment Rules will become applicable in respect of financial years commencing on or after 1st April, 2020.

 

Key Highlights of the Amendment Rules are as follows:

Principal Rules Amendment Rules Implication
Rule 8A. Appointment of Company Secretaries in companies not covered under rule 8 :

 

A company other than a company covered under rule 8 which has a paid-up share capital of five crore rupees or more shall have a whole-time company secretary.

Rule 8A. Appointment of Company Secretaries in companies not covered under rule 8 :

 

Every private company which has a paid-up share capital of ten crore rupees or more shall have a whole -time company secretary.

The threshold of paid up share capital for the purpose of appointment of whole time company secretary in a private limited company has been increased from 5 crore rupees to 10 crore rupees.

 

From the next financial year, i.e. April, 2020 every private company with a paid-up share capital of Rs.10 crore has to mandatorily have a whole-time company secretary.

 

Previously, only companies with a paid-up share capital of Rs. 5 crores were mandated to appoint a company secretary.

 

Further, the amendment brings in more clarity in terms of applicability to only private limited companies.

Rule 9. Secretarial Audit Report :

 

(1) For the purposes of sub-section (1) of section 204, the other class of companies shall be as under-

 

(a) every public company having a paid-up share capital of fifty crore rupees or more; or

 

(b) every public company having a turnover of two hundred fifty crore rupees or more.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rule 9. Secretarial Audit Report :

 

(1) For the purposes of sub-section (1) of section 204, the other class of companies shall be as under-

 

(a) every public company having a paid-up share capital of fifty crore rupees or more; or

 

(b) every public company having a turnover of two hundred fifty crore rupees or more.

Or

(c) every company having outstanding loans or borrowings from banks or public financial institutions of one hundred crore rupees or more.”

 

Explanation :- For the purposes of this sub-rule, it is hereby clarified that the paid up share capital, turnover, or outstanding loans or borrowings as the case may be, existing on the last date of latest audited financial statement shall be taken into account.

 

 

With the Amendment Rules, every company with outstanding loans/ borrowings from financial institutions of Rs. 100 crore or more is brought under the purview of Section 204 (1) of the Companies Act, 2013 (“Act”).

 

Section 2014 of the Act deals with “Secretarial Audit for Bigger Companies” and mandates every listed company and any company belonging to other classes of companies (as may be prescribed) to annex its Board Report, a secretarial audit report given by the Company Secretary in practice for their financial statement.

 

Now, through the present Amendment, every company with outstanding loans/ borrowings from financial institutions of Rs. 100 crore or more is being included for the purpose of secretarial audits.

 

A further explanation has been added in order to clarify that the paid up share capital/ turnover/ outstanding loans or borrowings will be considered as per the last date of latest audited financial statement.

 

Source: Ministry of Corporate Affairs

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