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Key Notifications and Clarifications Issued by MCA in 2017
The Ministry of Corporate Affairs (MCA) has issued several important notifications and clarifications in 2017 concerning Company Law, Deposit Rules, and the Insolvency and Bankruptcy Code. The following are key updates:
1. MCA Notifies Companies (Acceptance of Deposits) Amendment Rules, 2017
MCA, through Notification No. G.S.R. 454(E) dated May 11, 2017, has amended the Companies (Acceptance of Deposits) Rules, 2014 by making changes to Rule 2(1)(c)(xviii) and Rule 5(1).
Key Amendments:
(a) Amendment to Rule 2(1)(c)(xviii):
- The words “Infrastructure Investment Trusts” have been inserted after “Domestic Venture Capital Funds” to widen the scope of permitted deposit sources.
(b) Amendment to Rule 5(1):
- The revised provision allows companies to accept deposits without a deposit insurance contract until March 31, 2018, or until the availability of a deposit insurance product, whichever is earlier.
Reference: MCA Notification
2. Clarification on Applicability of Section 16(1)(a) of Companies Act, 2013
MCA issued Circular No. 4/2017 [F.NO.17/89/2016-CL-V], dated May 16, 2017, providing clarification on the applicability of Section 16(1)(a) of the Companies Act, 2013, regarding rectification of company names.
Key Clarification:
A query was raised by the Regional Director, Mumbai, seeking guidance on whether fresh applications under Section 16 of the Companies Act, 2013, can be entertained if they were earlier rejected under Section 22(1)(ii)(b) of the Companies Act, 1956, for exceeding the 12-month limitation period.
MCA’s Response:
- The Ministry, after consulting the Department of Legal Affairs, clarified that applications rejected under Section 22(1)(b) of the Companies Act, 1956, for being time-barred cannot be revived under Section 16(1)(a) of the Companies Act, 2013.
- Even though the new Act does not prescribe a specific limitation period, an extinguished limitation cannot be revived.
Reference: MCA Circular
3. MCA Notification on the Enforcement of Provisions of Section 2(a) to (d) of the Insolvency and Bankruptcy Code, 2016
MCA, through a notification, has declared April 1, 2017, as the date from which provisions of Section 2(a) to (d) of the Insolvency and Bankruptcy Code, 2016 relating to voluntary liquidation or bankruptcy will come into force.
Applicability of the Code:
The Insolvency and Bankruptcy Code, 2016, applies to:
✔ Companies incorporated under the Companies Act, 2013 or any previous Company Law.
✔ Companies governed by any special Act.
✔ Limited Liability Partnerships (LLPs) incorporated under the LLP Act, 2008.
✔ Other notified bodies incorporated under any law.
✔ Partnership firms and individuals in relation to insolvency, liquidation, voluntary liquidation, or bankruptcy.
Clarification by MCA:
MCA also issued an explanatory memorandum stating that giving retrospective effect to the notification is procedural in nature and does not adversely affect any entity.
Reference: Official Gazette Notification
These notifications and clarifications reflect MCA’s continued efforts to enhance corporate governance, streamline compliance, and implement insolvency reforms. The amendments provide greater clarity for companies and regulatory bodies while ensuring better corporate compliance and financial discipline.
