Beyond Dates: Understanding Event-Based Compliance for 2024-25 - MMJC

Introduction.

With beginning of new fiscal year, there has begun a new cycle of compliances. Considering the lengthy list of compliances, a compliance calendar proves to be a useful tool for the secretarial teams of companies. A compliance calendar is a date wise list of compliances to be undertaken during the year.

The compliance calendar provides a list of forms and the due dates for their filing, example being, form PAS-6 must be filed by 30^th May or form DPT-3 must be filed by 30^th June. However, in this article, we shall not discuss about dates-based compliances, but shall deliberate upon some event-based compliances falling in this fiscal year 2024-25. We shall discuss the compliances as per the provisions of Companies Act 2013 (‘the Act’) and Securities and Exchange Board of India [Listing Obligations and Disclosure Requirements] Regulations 2015 (‘LODR regulations’).

CSR related compliances.

As per section 135(6) of the Act, April 30 is the due date for transferring unspent CSR amount relating to ongoing project to separate bank account. But in addition to this there are some more things to be noted in this behalf:

• Transfer of unspent CSR amount to funds specified in Schedule VII of the Act: Amount remaining unspent out of the CSR amount marked for ongoing projects initiated by companies in FY 2020-21, which have completed their 1+3-year term by FY 2023-24, must be transferred to schedule VII fund by 30th April 2024.
• Timeline for conducting CSR committee meetings: Further, the Act does not specify any timeline for conduct of corporate social responsibility committee meetings. However, it is advisable to conduct first meeting of CSR committee at earliest after commencement of new fiscal year to determine the CSR policy and annual action plan for new fiscal year.
• Disclosure of details relating to CSR projects: The Act mandates companies to disclose their CSR committee’s constitution, CSR policies, and approved CSR projects on their website. While no timeline is prescribed, it is advisable to update the website as soon as the CSR policy is revised in the first CSR committee meeting.

Directors related compliances.

Compliances relating to appointment of directors are not bound by dates. They are to be undertaken within the prescribed time after the happening of certain event like appointment of director. But still there are some compliances relating to directors which are to be looked at during this year:

• As per section 149 subs-section (10) and sub-section (11) of the Act, an independent director cannot be appointed for more than two terms of 5 years each. Therefore, the independent director who were appointed during calendar year 2014 at the time of commencement of the Act or before that, and are still holding the position as independent director in the company, will have to vacate their office during calendar year 2024 on completion of second tenure and new independent director will have to be appointed depending upon the requirement of board composition as are applicable to company.
• Pursuant to  reg. 17(1D) of LODR regulations 2023, effective from 1^st April 2024 onwards, the appointment of directors of company who are not subject to retirement by rotation shall be subject to approval of shareholders ones in every five years. Since the upcoming annual general meeting is the first general meeting after amendment becoming effective, resolution for approving appointment of such directors must be brought before the shareholders for their approval. If any resolution pertaining to any matter relating to directors is to be placed before the shareholders, then it must be as per recommendation of nomination and remuneration committee. Also, as per regulation 17(11) of LODR regulations recommendation of board of directors is mandatory in case of any special business is placed before the members. Therefore, for matters relating to appointment of new independent director or validating appointment of permanent director are to be brought before members of the company there must be held a recommendation from nomination and remuneration committee and board of directors.

Annual report related compliances.

Schedule V of LODR regulations mandate disclosures of following from annual reports for FY 2024:

• Particulars of senior management personnel of the company and any change during the year must in the senior management personnel of the company shall also be disclosed in the annual report.
• Disclosure in the annual reports, about the special rights to shareholders as disclosed to stock exchange in accordance with Para 5A Part A of schedule III of LODR regulations.

AGM related compliances:

Conduct of AGM is an altogether separate set of compliances. Right from sending notice to filing of returns of AGM, there are list of big and small compliances to be looked at. One of the most crucial compliances relating related party transaction applicable for listed companies is omnibus approval of material related party transactions.

Omnibus approval of material related party transactions granted at an annual general meeting pursuant to reg 23(4) of LODR regulations would be valid only till the next annual general meeting not exceeding fifteen months. It needs to be kept in mind that omnibus approval for such material related party transaction is brought before members at every annual general meeting.

One time compliance relating to demat.

By notifying rule 9B to Companies (Prospectus and Allotment of Securities) rules, 2014 all the private companies who are not small companies as on March 31, 2024, are required to obtain ISIN for all the securities issued by them and get the securities dematerialized. Such ISIN must be obtained on or before September 30, 2024. After obtaining the International Security Identification Number (‘ISIN’), the private companies will have to file a reconciliation of physical shares in form PAS-6 with registrar of companies as was earlier done by unlisted public companies only.

Conclusion.

While undertaking compliances, it is not only the dates of which one should be mindful. But also, one must look at the compliances triggered due to happening of certain event or amendment etc. also, a point to be noted is that attention needs to be paid to complimentary compliances to be done after the main compliance. For example, updation of register of directors after filing form for appointment of new director. Such small precautions save the companies from big financial and reputational damage.

This article is published in Taxmann. The link to the same is as follows: –

https://www.taxmann.com/research/company-and-sebi/top-story/105010000000023946/beyond-dates-understanding-event-based-compliance-for-2024-25-experts-opinion

This article is written by Ms Rutuja Umadikar – Research Associate – RND Team – rutujaumadikar@mmjc.in