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Companies (Management and Administration), Second Amendment Rules

Companies (Management and Administration), Second Amendment Rules

Introduction:

In a significant stride towards enhancing corporate transparency and governance, the Companies (Management and Administration) Second Amendment Rules, 2023 have been introduced. These pivotal changes, set to come into effect upon their publication in the Official Gazette, aim to strengthen the mechanisms governing companies in India. The primary objective behind these amendments is to fortify the existing mechanisms, ensuring that businesses adhere to higher standards of transparency and governance.

Date of Notification– 27th October 2023

Date of Enforcement – 27th October 2023

Key Amendments:

The Designation Mandate:

Rule 9 of the Companies (Management and Administration) Rules, 2014, witnesses a transformative addition with the insertion of sub-rules (4) to (8). The cornerstone of this amendment lies in the mandatory designation of an individual responsible for furnishing and cooperating in providing information regarding beneficial interests in a company’s shares to the Registrar or any authorized officer.

Who can be the Designated Individual?

Every company, under sub-rule (4), is now required to designate a responsible person, and interestingly, the choice of this person varies based on the company’s structure.

  • Company Secretary:

If there’s a requirement for a company secretary under the Act and relevant rules, the company may designate the company secretary for this pivotal role.

  • Key Managerial Personnel:

In the absence of a company secretary, the responsibility can be shouldered by a key managerial personnel, excluding the company secretary.

  • Directors:

If the company lacks both a company secretary and key managerial personnel, every director becomes a viable option for this crucial designation.

Transitional Provisions:

Until a specific person is designated as per sub-rule (4), the responsibility falls on certain individuals by default. This includes the company secretary, managing director, or manager, depending on the company’s existing structure.

Annual Return Disclosure:

The transparency drive continues as every company is now mandated to disclose details of the designated person in their annual return, providing stakeholders with a clearer picture of the internal governance structure.

Intimation of Changes:

Flexibility is key, and the amendment recognizes that. In the event of a change in the designated person, the company must promptly intimate the Registrar using the specified e-form GNL-2, as per the Companies (Registration Offices and Fees) Rules, 2014.

Conclusion:

These amendments represent a paradigm shift in the corporate landscape, underscoring the importance of accountability, transparency, and a robust governance framework. As companies gear up to implement these changes, the regulatory landscape evolves, fostering a business environment that is not only compliant but also focused on ethical practices and stakeholder interests. Stay tuned for a new era of corporate governance!

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