Chirag M. Shah and Pratik K. Shah
Chartered Accountants  

1.  Guidelines for filing application to Central Government for appointment of sole selling agent. (Issued by Department of Company Affairs).

The Central Government has notified the guidelines for filing statutory application under section 294AA of the Companies Act, 1956, for appointment of a sole selling agent. Accordingly, the guidelines provide that the application should be made in accordance with the Companies (Appointment of Sole Selling Agents) Rules, 1975 and should be accompanies by following:

1.     Application fee as per details given below:

2.     A copy each of the audited annual accounts of the applicant company and of the Sole Selling Agents for the last three years.

3.     A copy each of certified copies of Board of Directors resolution / and special Resolution by members approving the proposal to appoint Sole Selling Agent.

4.     A copy of previous approval obtained from the Central Government.

5.     A certified copy of the Marketing/ Sole Selling Agency Agreement proposed to be entered into with the Sole Selling Agent.

6.     Percentage of shares held by the applicant company, its directors and their relatives in the Sole Selling Agent.

7.     Percentage of shares held by the Sole Selling Agents, its directors and their relatives in the applicant company.

8.      Justification for variation, if any, of rate(s) of commission for earlier appointment and those proposed (in case of reappointment).

2.    Guidelines for filing application to Central Government for obtaining exemption from the provisions of section 58A. (Issued by the Department of Company Affairs).

The Central Government has issued guidelines for filing statutory application under section 58A(8), the Companies Act, 1956 for claiming exemption from the provisions of section 58A. The guidelines provide that the application should be made in accordance with Companies (Application for Extension of Time or Exemption under sub-section (8) of section 58A) Rules, 1979 and should be accompanied by following:

1.   Application fee as per details given below:

2.   Copies of latest audited accounts and balance sheets of the company.

3.    A copy of the Memorandum and Articles of Association of the company.

4.   Original newspaper clippings of the public notices published in English and vernacular languages of the region in which registered office of the company is situated.

5.   Certified copy of Resolution of Board of Directors approving the proposal of the company.

6.   Copy of previous approval / order, if any, obtained under section 58(A) from the Central Government granting exemption/ extension of time during last ten years.

7.   Certificates from the statutory Auditors:

(a)   To the effect that the company has not contravened any other provisions of section 58A.

(b)   To the effect that deposits held by the company are within limits.

8.    Deposit position of the company as at 31^st March during the current year and the past two years.

9.    One copy each of the advertisement issued in newspapers pursuant to rule 4 of the Companies (Acceptance of Deposits) Rules, 1975.

3.   Companies altering their “object clause” permitted to change their name also.  Circular No. 19/2003, Dt. 24-04-2003.  

The Department of Company Affairs (DCA) has , clarified that the Insurance Regulatory and Development Authority has notified the Insurance Regulatory and Development Authority (Insurance Broker) Regulations, 2002 permitting private sector companies to carry on the insurance broker’s business. Therefore, DCA has directed Registrar of Companies to permit change of name of existing companies on their changing the objects to undertake the business of insurance brokers also.

4.      Companies (Acceptance of Deposits) (2^nd Amendment) Rules, 2003 – Notification dated 9^th April, 2003. 

The Form of annual return for furnishing the particulars of deposits accepted u/s. 58A read with Companies (Acceptance of Deposits) Rules, 1975 is amended to give effect to reduction in the rate of interest payable on deposits. Thus, item No.2 & 4 of para-1 giving the breakup of deposits for different rate of interest is amended.   

5.   Companies (Amendment) Bill, 2003 was presented in Rajya Sabha on 7th May,   2003.Highlights of the few topics of proposed amendments are as follows:

       LARGE PARTNERSHIP FOR PROFESSIONALS

Ø   Firms of professional like Advocates, Chartered Accountants, Cost Accountants, Company Secretary, Doctors, Architects, etc. can form partnership firm with up to 50 partners.

      FORMATION OF COMPANY

Ø  Two copies of photographs of all subscribers to memorandum and the witnesses along with proof of identity shall be submitted [Section 13(4)].

Ø   Requirement that each subscriber should write his address, description and occupation is done away with. He only has to sign [Section 13(3)(c)]. Similar provision made in respect of Articles of Association [Section 30(2)].

Ø   Memorandum and Articles can be printed electronically or in any other way as may be prescribed.

Ø   Centra.1 Government can anytime order change of name of any company on ground of security of the State or public interest [Proviso to section 22(1)].

Ø    A company can be licensed under section 25 only if its objects are not confined to one State.

Ø   Fees for supplying copies of Memorandum or Articles will be prescribed by Central Government (present fee of Re. 1 is negligible as per present costs).

       DIVIDEND

Ø   Dividend cannot be declared unless arrears of depreciation for last 10 years are provided.

Ø   Dividend cannot be declared unless provision for previous years' losses are made (in printed copy of the Amendment Bill, it is not clear whether it is 'previous year's losses 'previous years' losses' or It should be 'previous year's losses'. Otherwise company may be able to declare dividend for a very long time [Section 205(1) amended],

Ø    It is specifically provided that interim dividend declared by Board cannot be revoked or modified. The amount of interim dividend should be deposited in separate bank account within five days.

Ø     In absence of profits for current year, dividend can be distributed from accumulated profits only with consent of all Directors and prior approval of financial institutions. The resolutions will also have to be passed in General Meeting as Special Resolution [Section 205(8) amended].

Ø     In case of fractional coupons, time limit of 30 days is prescribed for distributing proceeds of sale to the persons who are entitled thereto.

June 2003

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