MKB & Associates

Company Secretaries
(Private & Confidential)
(for our retainee clients only)
Corporate Update Bulletin: 11
Date:09-02-11

Ministry aligning its policies to suit the need of the time-

Press Note 2 and Press Note 4

The Ministry of Corporate Affairs has granted exemption to companies

having subsidiaries from compliance with the provisions of section 212.
This exemption shall act as a boost for corporate sector thereby reducing
the cost and time consumed for carrying out the said compliance without
abating the transparency norms for good corporate governance.

Ministry has in its move towards providing relief to Indian corporate has
come out with two Press Notes, details of which are mentioned
hereinbelow:

Press Note No. 2/2011 dated 8.2.2011- General Exemption under

Section 211

Section 211 of the Companies Act, 1956 requires that the balance sheet
and profit and loss account of a company shall be in the form set out in
Part I of Schedule VI or in such other form as may be approved by the
Central Government either generally or in any particular case. However,
considering the need of align the disclosure requirements of our country
with those of foreign companies and to generate competitive advantage
to Indian corporate, it has decided to grant general exemption to the
following categories of companies from compliance with the disclosures
requirement of Part II of Schedule VI

Class of Companies Exemptions from para(s) of

Part-II of Schedule VI.
Companies producing Defence para 3(i)(a), 3(ii(a), 3(ii)(d), 4-C, 4-
Equipments including Space D (a) to (e) except (d).
Research;
Export Oriented company (whose para 3(i)(a) 3(ii)(a), 3(ii)(b), 3(ii)
export is more than 20% of the (d).
turnover);
Shipping companies (Including para 4-D (a) to (e) except (d).
Airlines);
Hotel companies (including para 3(i)(a) and 3(ii)(d)
Restaurants);
Manufacturing companies/multi- para 3(i)(a) and 3(ii)(a).
product companies;
Trading companies; para 3(i)(a) and 3(ii)(b)
Construction Companies – the problem remains??:
We have seen in the recent past that Construction Companies,
wherein plethora of materials such as Cement, Iron rods, bricks,
sand, etc are used, were refused exemption from disclosure
requirements of part II of Schedule VI. It is not clear if such
companies would be covered under any of the class of Companies
mentioned above and avail exemption. We are afraid such
companies and other companies not falling under the class of
companies mentioned above, may still have to approach the
Ministry for claiming the exemption.

Press Note No. 4/2011 dated 8.2.2011- Managerial Remuneration

in unlisted companies having no profits/ inadequate profits

Public limited companies (listed and unlisted) with no profits/ inadequate

profits are currently required to approach the Ministry for approval in
those cases where the remuneration of Directors/ equivalent managerial
personnel exceeds certain limits. The matter has been re-examined by the
Ministry in the light of the evolving economic and regulatory environment
and it has been decided that in the case of unlisted companies so long as
the conditions specified in Schedule XIII, including special resolution of
shareholders and absence of default on payment to creditors, are fulfilled
approval will not be needed hereafter.

Schedule XIII of the Companies Act 1956 is being amended to provide that
unlisted companies (which are not subsidiaries of listed companies) shall
not require Government approval for managerial remuneration in cases
where they have no profits/ inadequate profits, provided they meet the
other conditions stipulated in the Schedule.

It is only after the exact amendment to the Schedule XIII are

notified that we shall understand actual impact of this Circular.
The Press Note states that approval would not be necessary if the
conditions specified in Schedule XIII are complied with. It may,
however, be noted that even now it is only when the conditions
specified in Schedule XIII are not complied with, that the
companies have to approach the Ministry for its approval. We
await the notification amending Schedule XIII to comprehend the
nature of relaxation provided.