MCA Update: Compulsory Demat rules not applicable to Nidhi Co, Govt Co and WOS

Ministry of Corporate Affairs (MCA) has exempted such unlisted public companies, which are Nidhi Companies, Government Companies and Wholly Owned Subsidiary Companies, from complying with compulsory dematerialisation rules

Ministry of Corporate Affairs (MCA) issued a notification dated 22nd January, 2019 to alter Companies (Prospectus and Allotment of Securities) Rules, 2014 by adding a sub-rule to Rule 9 which states that all unlisted public companies are required to demat all its shares before 01st April, 2019.

This new sub-rule is giving an exemption to all unlisted public companies which are Nidhi Companies, Government Companies and Wholly Owned Subsidiary Companies from compliance of Rule 9 of such rules. This means that physical shares of such companies can still be transferred without dematerialisation even after the deadline of 01st April, 2019. Such companies are not required to do compliance of Rule 9.

Copy of Notification can be accessed below:

MCA Updates: Directors to submit their KYC to MCA

MCA would be conducting KYC of all Directors of all companies annually through a new eform viz. DIR-3 KYC to be notified and deployed shortly.

Update 25/07/2018: Click here for more detailed information on DIN KYC

Following points to be kept in mind in this regard by every director.

1. Every Director who has been allotted DIN on or before 31st March, 2018 and whose DIN is in ‘Approved’ status, would be mandatorily required to file Form DIR-3 KYC on or before 31st August, 2018.

2. While filing the form, the Unique Personal Mobile Number and Personal Email ID would have to be mandatorily indicated and would be duly verified by One Time Password (OTP). 

3. The form should be filed by every Director using his own DSC and should be duly certified by a practicing professional (CA/CS/CMA). 

4. Filing of DIR-3 KYC would be mandatory for Disqualified Directors also.

5. After expiry of the due date by which the KYC form is to be filed, the MCA21 system will mark all approved DINs (allotted on or before 31st March 2018) against which DIR-3 KYC form has not been filed as ‘Deactivated’ with reason as ‘Non-filing of DIR-3 KYC’. 

6. After the due date, filing of Form DIR-3 KYC in respect of such deactivated DINs shall be allowed upon payment of a INR 5,000 only, without prejudice to any other action that may be taken.

7. While filing form, a person is required to use PAN based DSC in case of Indian national, whereas in case of foreign national, applicant's name in DSC should be matched with name mentioned in Passport.

You can find below copy of notification.

MCA Update: MCA notified significant beneficial ownership rules

Ministry of Corporate Affairs (MCA) issued a notification notifying the Companies (Significant Beneficial Owners) Rules, 2018 with effect from 13th June, 2018.

This step is taken by MCA after notifying Section 90 of Companies Act, 2013 with effect from 13th June, 2018. Section 90 deals with "significant beneficial owner".

These rules are in respect to provide for significant beneficial ownership aimed at tracking the real beneficiaries of shares as often benami holdings are found in shell companies. The new section (Section 90) that was inserted in the Companies Act is also part of the global fight against money laundering and came at the behest of Paris based Financial Action Task Force with countries such as the UK already incorporating the provisions. 

This section and the rules provide for maintaining of a register of “beneficial owners”. MCA has set the limit at 10% to whom such rules will be applicable, thereby increasing the ambit of the provisions to cover a larger base of shareholders, who may be warehousing the shares for someone else.

These rules provide for mandatory disclosure within a stipulated period and once the rules are notified there will be a rush of filings as shares in most companies are not widely held. A failure to disclose beneficial ownership can result in a fine of up to Rs 50,000 with a daily penalty of Rs 1,000, if the failure to comply with the rules continues. The Companies Act also allows the Centre to investigate cases of beneficial ownership.

The copy of rules can be found below.