By: Muskan Sharma
The Central Government amended Schedule III of the Companies Act, 2013 (hereinafter referred to as “Act”), which shall be applicable from April 1, 2021. The Amendment was a result of the powers conferred on the Central Government under Section 467 of the Act.
The Amendment provided that the disclosures of the loans or advances granted to the promoters, directors, KMP (Key Managerial Personnel), and related parties shall be made. The Amendment puts more emphasis on widening the scope of audit reporting. It provides that the company must use accounting software for maintaining its books, that facilitates the recording of audit trail of every transaction.
The MCA (Ministry of Corporate Affairs) via the Amendment in the rules, further provided that in respect of proceedings pending or initiated against the company for any Benami property under the Benami Transactions (Prohibition) Act, 1988, the company must make the following disclosures:
- Details of such properties.
- Beneficiaries and their details.
- If the property is mentioned in the books of the firm, then reference to concerned item no. in the Balance Sheet.
- If there is no reference of such property in the books of the firm, then facts along with reasons.
- When the company is an abetter or a transferor in the proceedings, then concerned details.
- Nature of Proceedings, Status (Pending/Completed) of Proceedings, etc.
- Company’s view on such proceedings.
Apart from these, the MCA (Ministry of Corporate Affairs) further provided that if the company has traded in cryptocurrency (Bitcoin) or any virtual currency, then it must disclose:
- Profit or loss on the transaction involving cryptocurrency or virtual currency.
- The total amount of currency held by the company, as on the reporting date.
- Deposits or Advances to/from any person for trading in cryptocurrency or virtual currency.
The RBI has also announced that it will soon launch its cryptocurrency in the financial market. Apart from this, a bill titled ‘The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’ will be introduced soon by the Government. Therefore, it can be interpreted that after the Supreme Court’s decision in Internet and Mobile Associaton of India v. Reserve Bank of India[1], the Central Government is making efforts to recognize the digital currency market and boost the performance of India in the global financial market.
The Amendment will consequently make the corporate governance more transparent by ensuring fair procedural compliances to be followed by the companies.
[1] Writ Petition (Civil) No. 528 of 2018