NCLT Second Amendment Rules, 2019

May 2019

NCLT Second Amendment Rules, 2019

MCA notified National Company Law Tribunal (Second Amendment) Rules, 2019 on May 8, 2019. By this notification, it has amended rule 84 and prescribed the eligibility norms for filing CAS under Section 245 of the Companies Act, 2013. A CAS is a representative law suit which allows a group of people with common interests and grievances to lodge a complaint or sue the accused party. Section 245 allows members and depositors of a company to file CAS for relief before the National Company Law Tribunal (“NCLT”), in case the company’s affairs are being conducted in a manner prejudicial to its own interests or to the interests of members or depositors. As per the amended rule, CAS can now be filed by

a) In case a company has share capital – (i) at least 5% of the total members or 100 members, whichever is less; or (ii) member(s) holding not less than 5% of issued share capital, in case of unlisted company, and not less than 2%, in case of listed company.

b) In case a company has depositors – (i) at least 5% of total depositors or 100 depositors, whichever is less; or (ii) depositor(s) to whom the company owes not less than 5% of the total deposits of the company.

PSA View: While CAS is a new phenomenon under Indian law, globally, it is usually filed by multiple aggrieved parties. However, in India, CAS can now be filed even by a single shareholder or depositor provided the aforementioned requirements are met. These amendment rules significantly empower minority shareholders and will now become an important threshold to consider during M&A transactions.

Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2019

MCA also notified the Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2019 on May 8, 2019 which came into effect from May 10, 2019. As per this amendment

a) the filing fee for e-form STK-2 (voluntary application for strike-off by a company) has been increased from INR 5,000 to INR 10,000;

b) all pending annual filings related to financials and annual return in e-form AOC-4 and MGT-7, should be completed upto the financial year in which the company ceased to carry on operations;

c) a company cannot file STK-2 after the issue of STK-7 (final strike-off notice sent by the Registrar of Companies (“ROC”));

d) the format of STK-4 (indemnity bond to be attached with e-form STK-2) has been modified by adding clause no. (viii) i.e. “The company has fulfilled all pending compliances, if any (Applicable in case an application under sub-section (2) of section 248 has been filed after the initiation of action under sub-section (1) of section 248)”; and

e) the format for STK-8 (statement of accounts to be attached with e-form STK-2) has been introduced.

PSA View: MCA has now clarified certain requirements which were ambiguous before May 8, 2019. For instance, as per law, a company can apply for voluntary strike-off if it ceases to carry out business operations for at least 2 financial years. This created ambiguity around the period till when all annual filings had to be completed. Different ROCs took different views. Some were of the opinion that filings had to be completed till the year the company shut down its operations while others took a view that filings ought to be completed till filing STK-2. The aforementioned amendment has now clarified this wherein all annual filings have to be completed till the company discontinues its business operations and not till it files STK-2. Another grey area was the format in which the statement of accounts had to be submitted with STK-2. With the introduction of STK-8, the format is now clear and will bring uniformity across filings.

By:

Jaya Moorjani