Insolvency and Bankruptcy Code 2016

Insolvency and Bankruptcy Code 2016

The Insolvency and Bankruptcy Code 2016 is a novel initiative which aims at a complete overhaul of the corporate debt legislation. It marks the dawn of a new era, an era of progressive thinking, greater transparency and stake holder activism. The new code seeks to repose lenders’ confidence in corporate debt structure and brings out legislation in line lenders and borrowers requirements and expectations.

Time has come where we need to let go off the old debt recovery laws and embrace the new legislation. The Insolvency and Bankruptcy Code 2016 brings with it an array of welcome changes in almost every aspect of debt recovery.

The new Code requires an indepth study and analysis to appreciate the intention of the legislature and to face the new opportunities and challenges with ample preparedness.

To start on this journey of fresh learning, I am sharing my recent article on the topic “The Insolvency and Bankruptcy Code 2016 – A dawn of new era of Debt Reforms” for the benefit of fellow professionals and others. Kindly go through the article and share your views to enrich and improve my knowledge in this new code.

Thanks and Regards

Sr. Partner
M/s. S D h a n a p a l  &  A s s o c i a t e s
(a  Firm  of  Practising  Company  Secretaries)
Suite No.103, First Floor, Kaveri Complex,
96/104, Nungambakkam High Road,
(Next to NABARD and ICICI Bank),
Nungambakkam, Chennai – 600 034.
Land-line 044 – 4553 0256 / 0257
Dir-044-42652127 Cell-9677022712


M/s. S Dhanapal & Associates, a Firm of Practising Company Secretaries based in Chennai, emerged under the visionary initiative and guidance of Mr. S. Dhanapal, who is a fellow member of the Institute of Company Secretaries of India and a Law Graduate from Ambedkar Govt. Law College, Chennai, having nearly 15 years of experience in the areas of secretarial practice and legal advisory and drafting documents and agreements.

The firm was conceptualized with the idea of looking at all corporate transactions and compliances in a different facet, in a manner that the approach always keeps both law makers and corporates at win-win situation. From its humble beginnings as a sole proprietary concern, the firm has come a long way with a vibrant team of consisting of around 30 dedicated people consisting of nearly ten company secretaries, 2 In-house Advocates,number of employees and few secretarial trainees. Mr. Dhanapal, founding member, continues to lead and mentor the firm.

With its rich and diverse experience in the field of corporate compliances, the firm has carved its name in the market as a leading and iconic company secretary firm providing holistic services in the field of Secretarial, Legal, IPR and Foreign Exchange Related Matters.

The firm is an equal opportunity employer and derives its strength from the commitment, dedication, hard work and relentless pursuit for excellence of its team members. The firm practices the motto of providing outstanding and dedicated services to its clients in a timely and cost efficient manner

Companies (Removal of Difficulties) Third Order, 2016

Companies (Removal of Difficulties) Third Order, 2016.

the provisions contained in section 139, which provides for appointment of auditors has come into force on the 1st April, 2014;

1 . Short title and commencement.-

(1) This Order may be called the Companies (Removal of Difficulties) Third Order, 2016.

(2) lt shall be deemed to have come into force from lstApril, 2014.

2. In the Companies Act, 2013, in section ‘139, in sub-section (2), for the third proviso, the following proviso shall be substituted, namely:-

 "Provided also that every company, existing on or before the commencement of this Act which is required to comply with the provisions of this sub-section, shall comply with requirements of this sub-section within a period which shall not be later than the date of the first annual general meeting of the company held, within the period specified under sub-section (1) of section 96, after three years from the date of commencement of this Act.".


What are mergers and demergers

Merger or demerger of companies is given under the Companies Act, 1956. Chapter 5 of part 6 containing section 390 to 396A has provisions regarding the two terms mentioned above. The above mentioned chapters are related to the governance of mergers and demergers in companies. Let’s take a look at what mergers and demergers are.


Merger or amalgamation of private and public limited companies refers to a procedure wherein two or more companies combine their assets. It is a legal process where two or more companies combine their assets whereby the assets of two or more companies get transferred to or come under the control of one company.

There are two types of amalgamations private and public limited companies: One is “amalgamation in the nature of purchase” and the other is “amalgamation in the nature of merger”.

Amalgamation in the nature of merger is the one where all liabilities and assets of Transferor Company become the assets and liabilities of the transferee company after the merger. In this case business of Transferor Company has to be continued after the amalgamation.

Amalgamation in the nature of purchase is the case where conditions of Amalgamation in the nature of merger are not satisfied.


Demerger of private and public limited companies  are referred to that procedure wherein some part of a company is transferred to some other company and that transferred part works separately from the original company. Shareholders are given a good amount of share in the new company as well. Demerger is usually undertaken for two reasons. One is to focus on core business and the other is to create shareholder value. All the assets and liabilities of the company before the demerger, becomes the property of the new company.


Merger and demerger of a company are the tools for Corporate Structuring. Mergers have become a very common phenomenon in the business industry due their strategic advantage.


Thanks a Lot to

  • Submitter Name: Rohit
  • Submitter Email:

LLP Incorporation

Procedure of Incorporation of LLP

Limited liability partnership, as the name suggests it is another new form of partnership where the liability of all the partners is limited to the extent of the share invested by them. The biggest benefit of this kind of partnership is the partners are not liable for a single penny apart from their share, which is very common among people who have less amount of money and are not comfortable in taking high risks. The entire limited liability procedures and requisites are quite similar to that of incorporating a company but in case of a LLP there is no need of minimum contribution.

For the incorporation of a limited liability partnership  there is a proper procedure to be followed, which is explained below in detail:

  • File an Application: All the partners are required to obtain a designated partner identification number or DPIN. An application is to be filled for filing an eform for DIN or DPIN is essential.
  • Register or acquire DSC: After the application the next step is register for DSC which can only be done when a person has Digital Signature Certificates with the LLP Application.
  • New Registration: To file an application through the eform or for any other paid service on the portal, a person needs to register oneself as a user of the website, without which he cannot access anything from the website. After registering for the website, one can file the form for the incorporation of limited liability partnership.
  • Register the name of an LLP: The first step after registering as a user is to register for the name of a LLP; the name must be unique abiding by the rules of government and not in use by any other company or LLP. Fill Form 1 for application for the name proposed.
  • Incorporate a LLP: After the name has been proposed by filing form1, the next step is to file form 2 and get the LLP registered. Once the form has been approved by the official of the ministry, an email will be sent for the confirmation.
  • File LLP Agreement: Once the LLP is incorporated, an agreement is to be filed within 30 days of incorporation. The user has an obligation to file the information in form 3 regarding all the details about the agreement and any change made.

To conclude, incorporate a LLP and enjoy the benefits of working.

Special Thanks to

Submitter Name: Gaurav
Submitter Email:

Difference between a Private Limited Company and a Limited Liability Partnership

A company setup is one of the most difficult tasks which have to be performed with a lot of concern and understanding about the business. The most difficult task to be completed while founding a company is choosing the type of business in which you want to be incorporated. It can be a public sector company, Private Sector Company, one person company, limited liability partnership and many other types. The two most common and successful types of companies running in the business industry are private limited company and limited liability partnership. Let’s see the basic difference between them.

  1. Meaning- A private limited company is a company which has private entrepreneurship and is funded by its shareholders. The company is managed by shareholders themselves or they may hire directors for that task. A limited liability partnership may be public or private sector based and the partners in such a company are not responsible for each other’s negligence.
  2. Liability– The extent of liability in a private limited company is unlimited. In case of heavy loss, the partners or shareholders will be held responsible and they will have to pay off the debt by any means. In case of LLP, the extent of liability is limited to the extent of the shares of a partner. In case of a heavy loss no partner shall be held responsible.
  3. Member incorporation- A minimum of 2 members is compulsory to form a LLP and private limited company but in case of an LLP there is no restriction on the number of maximum members in the company. For a private limited company, 50 is the maximum number of members that can be incorporated in the company.
  4. Name of the company– The company can be named anything as per the choice of the partners of the company but it is mandatory that a LLP’s name should end with LLP and a private limited company’s name should end with private limited.
  5. Auditing of accounts– Accounts of a company are audited to keep a track of the financial activities of the company. In case of a private limited company it is mandatory have an audit at least once a year irrespective of the turnover and in case of an LLP an audit is compulsory only if the shareholder’s contribution is more than Rs. 25 lakh or the turnover is more than Rs. 40 lakh.
  6. Dissolution- The dissolution of a private limited company involves fewer procedures. It is either voluntary or by the order of National Company law tribunal. In case of an LLP, it involves more procedures and it is usually voluntary or on the order of National Company law tribunal.
  7. Credibility of the company- The credibility of a private limited company is high and that of a LLP is medium.


Be it a private limited company or a LLP, what makes a company successful is the hard work put in it so make sure that you leave just no formalities left or no work undone


  • Submitter Name: Gaurav
  • Submitter Email:

Companies Auditor’s Report Order, 2015

MCA Notifies the Companies (Auditor’s Report) Order, 2015



New Delhi, the 10th April, 2015

S.O. 990(E).—In exercise of the powers conferred by sub-section (11) of section 143 of the Companies Act, 2013 (18 of 2013 ) and in supersession of the Companies (Auditor’s Report) Order, 2003, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 480 (E), dated the 12th June, 2003, except as respects things done or omitted to be done before such supersession, the Central Government, after consultation with the Institute of Chartered Accountants of India, constituted under the Chartered Accountants Act, 1949 (38 of 1949), hereby makes the following Order, namely:—

  1. Short title, application and commencement. – (1) This order may be called the Companies (Auditor’s Report) Order, 2015. 4 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(ii)]

(2) It shall apply to every company including a foreign company as defined in clause (42) of section 2 of the Companies Act, 2013 (18 of 2013) [hereinafter referred to as the Companies Act], except – (i) a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949); (ii) an insurance company as defined under the Insurance Act,1938 (4 of 1938); (iii) a company licensed to operate under section 8 of the Companies Act; (iv) a One Person Company as defined under clause (62) of section 2 of the Companies Act and a small company as defined under clause (85) of section 2 of the Companies Act; and (v) a private limited company with a paid up capital and reserves not more than rupees fifty lakh and which does not have loan outstanding exceeding rupees twenty five lakh from any bank or financial institution and does not have a turnover exceeding rupees five crore at any point of time during the financial year.

(3) It shall come into force on the date of its publication in the Official Gazette.

  1. Auditor’s report to contain matters specified in paragraphs 3 and 4. – Every report made by the auditor under section 143 of the Companies Act, on the accounts of every company examined by him to which this Order applies for the financial year commencing on or after 1st April, 2014, shall contain the matters specified in paragraphs 3 and 4.
  1. Matters to be included in the auditor’s report. – The auditor’s report on the account of a company to which this Order applies shall include a statement on the following matters, namely:—

(i)                            (a) whether the company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets;

(b) whether these fixed assets have been physically verified by the management at reasonable intervals; whether any material discrepancies were noticed on such verification and if so, whether the same have been properly dealt with in the books of account;


(a) whether physical verification of inventory has been conducted at reasonable intervals by the management;

(b) are the procedures of physical verification of inventory followed by the management reasonable and adequate in relation to the size of the company and the nature of its business. If not, the inadequacies in such procedures should be reported;

(c) whether the company is maintaining proper records of inventory and whether any material discrepancies were noticed on physical verification and if so, whether the same have been properly dealt with in the books of account;

(iii) whether the company has granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Companies Act. If so,

(a) whether receipt of the principal amount and interest are also regular; and

(b) if overdue amount is more than rupees one lakh, whether reasonable steps have been taken by the company for recovery of the principal and interest;

(iv) is there an adequate internal control system commensurate with the size of the company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. Whether there is a continuing failure to correct major weaknesses in internal control system.

(v) in case the company has accepted deposits, whether the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed thereunder, where applicable, have been complied with? If not, the nature of contraventions should be stated; If an order has been passed by Company Law Board or National ¹Hkkx IIµ[k.M 3(ii)º Hkkjr dk jkti=k % vlk/kj.k 5 Company Law Tribunal or Reserve Bank of India or any court or any other tribunal, whether the same has been complied with or not?

(vi) where maintenance of cost records has been specified by the Central Government under sub-section (1) of section 148 of the Companies Act, whether such accounts and records have been made and maintained;

(vii) (a) is the company regular in depositing undisputed statutory dues including provident fund, employees’ state insurance, income-tax, sales-tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues with the appropriate authorities and if not, the extent of the arrears of outstanding statutory dues as at the last day of the financial year concerned for a period of more than six months from the date they became payable, shall be indicated by the auditor.

(b) in case dues of income tax or sales tax or wealth tax or service tax or duty of customs or duty of excise or value added tax or cess have not been deposited on account of any dispute, then the amounts involved and the forum where dispute is pending shall be mentioned. (A mere representation to the concerned Department shall not constitute a dispute).

(c) whether the amount required to be transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder has been transferred to such fund within time.

(viii) whether in case of a company which has been registered for a period not less than five years, its accumulated losses at the end of the financial year are not less than fifty per cent of its net worth and whether it has incurred cash losses in such financial year and in the immediately preceding financial year;

(ix) whether the company has defaulted in repayment of dues to a financial institution or bank or debenture holders? If yes, the period and amount of default to be reported;

(x) whether the company has given any guarantee for loans taken by others from bank or financial institutions, the terms and conditions whereof are prejudicial to the interest of the company;

(xi) whether term loans were applied for the purpose for which the loans were obtained;

(xii) whether any fraud on or by the company has been noticed or reported during the year; If yes, the nature and the amount involved is to be indicated.

  1. Reasons to be stated for unfavourable or qualified answers.–

(1) Where, in the auditor’s report, the answer to any of the questions referred to in paragraph 3 is unfavourable or qualified, the auditor’s report shall also state the reasons for such unfavourable or qualified answer, as the case may be.

(2) Where the auditor is unable to express any opinion in answer to a particular question, his report shall indicate such fact together with the reasons why it is not possible for him to give an answer to such question.

[F. No. 17/45/2015-CL-V]



Section 13 and Section 14 of Companies Amendment Act, 2015


MCA has notified Section 13 (related to Reporting on fraud) and Section 14 (Omnibus approval by Audit Committee of the Companies Amendment Act, 2015 and made applicable from 14th December, 2015.

Salient features of this ease of business move are:

a) Auditors need to report frauds to Central Government only above a threshold (of Rs. 1 crore and above) and in other cases, can report to Audit Committee / Board.

b) For related party transactions, audit committee could give omnibus approval and there is no need for a transaction by transaction approval.


Companies Act amendments likely for clarity on CSR norms

Government is likely to make further amendments in the Companies Act along with changes in certain rules as part of its efforts to provide more clarity on Corporate Social Responsibility (CSR) provisions.

A government-appointed high level panel recently submitted recommendations on CSR norms to the Corporate Affairs Ministry, which is implementing the Act.

made by the panel. The report has been cleared by Corporate Affairs Minister Arun Jaitley.

For further action on the panel’s suggestions, the ministry is looking at various options, including possible amendments to the Companies Act, they added.

Changes would be made to certain rules related to CSR activities apart from coming out with clarifications through circulars, sources said.

While amendments to the Act need to be cleared by Parliament, rules can be changed by the ministry itself.

Proposals for possible amendments to the Act would be submitted to the Companies Law Committee, sources said.

Amid concerns over certain provisions in the new Act, the ministry had set up the committee in June this year. The panel is expected to finalise its report by December-end.

The panel, chaired by former Home Secretary Anil Baijal, was tasked to make suggestions for improved monitoring of CSR spending.

“Reference to ‘any financial year’ in Section 135(1) of the Act, needs to be re-examined by the Ministry of Corporate Affairs with a view to making necessary amendment(s) either in Section 135(1) or in the relevant rule,” the panel said.

Besides, it has called for clarification with regard to the definition of the term ‘net profit’ used for deciding CSR spending criteria. 

Section 135 of the Act pertains to CSR.

Among others, the committee had said differential tax treatment for expenditure on various CSR activities may create unforeseen distortion in allocation of funds across development sectors.

At present, certain activities such as contribution to the Prime Minister’s National Relief Fund qualify for tax exemption.

Already, the ministry has made a raft of changes to the Companies Act, 2013 — whose most provisions came into effect from April 1, 2014. Besides, various rules have been amended.

As per the Companies Law Committee’s terms of reference, it would also examine the recommendations received from the Bankruptcy Law Reforms committee, Committee on CSR, Law Commission and other agencies.