Corporate Newsletter: Extension of Udyog Aadhaar Memorandum (UAM) Validity – March 2022
The Ministry of Micro, Small and Medium Enterprises (MSME), vide gazette notification no. S.O.278 (E) dated January 19, 2022 has issued an amendment to the original notification number S.O. 2119 (E), dated June 26, 2020 and extended the validity of the Udyog Aadhaar Memorandum (UAM) and Entrepreneurs Memorandum Part-II (EM-II) up to March 31 , 2022. The original notification number S.O. 2119 (E), dated June 26, 2020 stated that all existing enterprises registered under Entrepreneurs Memorandum (EM – Part II) or UAM upto June 30, 2020 shall register again on the Udyam Registration portal before March 31, 2021, which was later extended to December 31, 2021.
Keeping in view the difficulties faced due to the pandemic, the Ministry of Micro, Small and Medium Enterprises (MSME) has provided an amendment in Para 7 of the original notification number S.O. 2119 (E), dated June 26, 2020 and stated that the existing enterprises registered before June 30, 2020 shall continue to be valid for a period up to March 31, 2022.
With this notification, the existing EM Part-II and UAM holders would be able to migrate to the new system of Udyam Registration that was launched on July 01, 2020 and avail the benefits of government schemes.
Introduction of Special Situation Funds for Investment in Special Situation Assets
To rescue the businesses under financial stress, the Securities and Exchange Board of India (SEBI) has notified Securities and Exchange Board of India (Alternative Investment Funds) (Amendment) Regulations, 2022 with effect from January 24, 2022 to introduce the concept of “Special Situation Funds (SSF)”, a sub-category under Category I Alternative Investment Fund, which shall invest in special situation assets. Subsequently, SEBI has also issued a circular dated January 27, 2022 in order to provide clarity to the SSF framework. The key amended changes pertaining to SSF have been set out below.
1. Introduction to SSF: SSFs shall mean a Category I Alternative Investment Fund, that invests in special situation assets in accordance with its investment objectives and may act as a resolution applicant under the Insolvency and Bankruptcy Code, 2016 (IBC). They can also invest in securities receipts issued by asset reconstruction companies (ARCs), securities of companies in distress and any other asset or securities as may be prescribed by SEBI from time to time.
2. Registration of SSF: An applicant may apply for registration as a SSF in accordance with the provisions of Chapter II of the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012.
3. Corpus and investment in SSF: Each scheme of SSF shall have a corpus of at least INR 100,00,00,000 (Indian Rupees One Hundred Crores). SSF can accept an investment of minimum value of INR 10,00,00,000 (Indian Rupee Ten Crores) from an investor. In the case of an accredited investor, the SSF can accept an investment of minimum value of INR 5,00,00,000 (Indian Rupee Five Crore). Further, in case of investors who are employees or directors of the SSF or employees or directors of the manager of the SSF, the minimum value of investment shall be INR 25,00,000 (Indian Rupee Twenty-Five Lakh).
4. Investment by an SSF in the stressed loan acquired under Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021 (RBI Master Direction): SSF may acquire stressed loan in terms of Clause 58 of RBI Master Direction subject to a minimum lock-in period of 6 (Six) months. SSF acquiring stressed loans in terms of the RBI Master Direction shall comply with the due diligence requirements, as those mandated by the Reserve Bank of India for investors in ARC.
5. Restriction on investment: SSFs have been restricted from investing in (i) its associates, or (ii) units of any other alternative investment fund other than the units of an SSF, or (iii) units of SSFs managed or sponsored by its manager, sponsor or associates of its manager or sponsor. The introduction of SSF is a welcoming move by SEBI which will allow the much-needed alternative route of investment in stressed businesses and facilitate them to participate in the resolution process contemplated under IBC. This move is expected to contribute largely to rescue the stressed businesses in a timely manner.
Adjudication Order of Penalties under Section 454(3) pursuant to Companies Amendment Act 2020.
The Companies (Amendment) Act, 2020 (Amendment Act) was introduced to amend the Companies Act, 2013 (Act) with the intention to decriminalize various minor offences, to scale down the hefty penalties imposed thereunder and provide relief to the abiding corporates, amongst other aspects. Pursuant to the Amendment Act, imprisonment as a consequence of contravention of certain provisions of the Act has been done away with for over 46 offences under the Act, in addition to reducing, modifying and omitting the fines/penalties for these offences.
The Amendment Act has been enacted to remove the imposition of penal consequences in case of minute and technical defaults. Specifically, in case of default relating to non-compliance ofsubsection (4) of Section 92 or sub-section (1) or sub-section (2) of Section 137, the same has to be rectified either prior to, or within 30 (Thirty) days of, the issue of the notice by the adjudicating officer. Further, no penalty will be imposed in this regard.
Recently a private limited company (Company) along with its managing director and the company secretary filed a suo-moto application vide e-form GNL-1 for adjudication of penalty under the provisions of Section 92 and Section 137 of the Act. As per the facts provided, the Company was unable to file AOC 4 XBRL (Financial Statements) and e-form MGT 7 (Annual Return) for the financial year ended on March 31, 2020 as its Annual General Meeting (AGM) could not be held in time. Subsequently, the Company held its AGM on June 16, 2021 and made the filings viz. eform MGT 7 (Annual Return) for the Financial Year ended March 31, 2020 on June 28, 2021 and e-form MGT 7 (Annual Return) for the financial year ended on March 31, 2020 on July 20, 2021 and thus made good the default.
In terms of sub-section (4) of Section 92 of the CA 2013, every company shall file with the registrar of companies (ROC) a copy of the Annual Return, within sixty days from the date on which the AGM is held or where no AGM is held in any year within sixty days from the date on which the AGM should have been held together with the statement specifying the reasons for not holding the AGM, with such fees or additional fees, as applicable.
In terms of sub-section (1) & (2) of Section 137 of the CA 2013, a copy of the financial statements, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the AGM of the Company, shall be filed with the ROC within 30 (Thirty) days of the date of AGM. In case the AGM for any year has not been held, the Company shall attach a statement of facts and reasons for not holding the AGM with the financial statement and shall file the same with ROC. In the present case and pursuant to the Amendment Act, the adjudicating officer held that, no penalty shall be imposed for the default relating to the non-compliance of Section 92 and Section 137 of the Act as the said default was rectified by filing the annual return and financial statement for the financial year 2019-20 on June 28, 2021 and July 20, 2021 i.e. prior to the issue of notice by adjudicating officer. Therefore, it is evident from the instant case that the relaxations provided for under the Amendment Act can not only help the companies in the reduction of compliance costs but also help them focus on their business activities. In addition, the reduction in the gravity of penalties will have an encouraging effect on the corporates to suo-moto rectify their non-compliances.