Ministry of Corporate Office (“MCA”) vide its three separate notifications dated 24th March, 2021, has issued commencement of the provisions of the Companies (Amendment) Act, 2020, amendment to the Companies (Accounts) Rules, 2014, and amendment to the Companies (Audit and Auditors) Rules, 2014. Following is the brief on each notification:
1.Notification No. S.O. 1303(E): Commencement Notification
As per the above notification, Government of India has appointed 24th March, 2021, as the date on which the provisions of Section 23 and Section 45 of the Companies (Amendment) Act, 2020, shall come into force.
i. Pursuant to this notification, quantum of fine has been reduced for companies and every officer of the company for not complying with the provisions of Section 124 wherein it is specified that any unpaid or unclaimed dividend amount shall be transferred into Unpaid dividend account within thirty days from the date of declaration of dividend and subsequently shall be transferred to IEPF Account within 7 years from the date of transfer into Unpaid dividend account.
Now, if a company fails to comply with any of the requirements of this section, such company shall be liable to a penalty of one lakh rupees and in case of continuing failure, with a further penalty of five hundred rupees for each day after the first during which such failure continues, subject to a maximum of ten lakh rupees and every officer of the company who is in default shall be liable to a penalty of twenty-five thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees.
ii. Further, as per section 45 of the Amendment act, 2020, if a Registered Valuer doesn’t comply with the provisions mentioned in section 247 with respect to valuation in respect of any property, stock, shares, debenture, securities or goodwill or any other assets or net worth and net liabilities of the company, then he shall be liable to a penalty of Rs. 50000/- which was earlier prescribed as not less than Rs. 25,000 but which may extend to Rs. 1,00,000.
2. Notification No. G.S.R. 205(E): Amendment in Companies (Accounts) Rules, 2014
As per the above notification, a proviso has been inserted after sub-rule 1 of Rule 3 of the Companies (Accounts) Rules, 2014 wherein it has been inserted that every company using accounting software to maintain its books of accounts, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled w.e.f. 01st April, 2021. It has been notified vide notification no. G.S.R. 247(E) dated 01st April, 2021, this shall be effective from 01st April, 2022 instead of 01st April, 2021.
Further, clause (xi) & (xii) has been inserted in sub-rule 5 of Rule 8. Now Board’s Report shall also include the following:
3. Notification No. G.S.R. 206(E): Amendment in Companies (Audit and Auditors) Rules, 2014:
As per the above notification, disclosures requirement in Auditors report of the company with respect to holding as well as detail related to dealings in Specified Bank note during the period from 8th November, 2016, to 30th December, 2016, (clause d) has been omitted and few new disclosure requirements are required to be disclosed in the Auditors Report by inserting clause (e), (f) and (g) as mentioned below:
f. Whether the dividend declared or paid during the year by the company is in compliance with section 123 of the Companies Act, 2013.
g. Whether the company has used such accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all transactions recorded in the software and the audit trail feature has not been tampered with and the audit trail has been preserved by the company as per the statutory requirements for record retention. It has been notified vide notification no. G.S.R. 248(E) dated 01st April, 2021, this shall be effective from 01st April, 2022 instead of 01st April, 2021.
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