Companies (Management and Administration) Second Amendment Rules, 2023 – Key Changes to Rule 9

On October 27, 2023[1], the Ministry of Corporate Affairs amended Rule 9 through The Companies (Management and Administration) Second Amendment Rules, 2023, emphasizing improved clarity on declaring beneficial interest in shares to enhance corporate governance and compliance. This amendment addresses prior ambiguities in Section 89 of the Companies Act, aiming to improve corporate governance and compliance.

The noteworthy addition is Rule 9(4), Mandating every company to appoint a designated person responsible for providing information and cooperating with the Registrar or any authorized officer regarding beneficial interest in the company’s shares.

Rule 9(5) outlines that for sub-rule (4), the company can designate: (i) a company secretary if required by the Act and related rules, (ii) key managerial personnel (excluding the company secretary), or (iii) every director if there is no company secretary or key managerial personnel.

 Rule 9(6) specifies that until a person is designated under sub-rule (4), the deemed designated persons are: (i) the company secretary if required by the Act and rules, or (ii) every Managing Director or Manager if no company secretary is appointed, or (iii) every director if there is no company secretary or Managing Director/Manager.

Rule 9(7) mandates companies to disclose the designated person’s details in their Annual Return, ensuring stakeholders and regulatory bodies access vital information on beneficial interests in company shares.

Rule 9(8) requires prompt communication of changes in the designated person to the Registrar via e-form GNL-2, as per the Companies (Registration Offices and Fees) Rules, 2014, ensuring an updated record of designated persons.

The above-mentioned amendments aim to strengthen corporate governance and regulatory compliance by clarifying responsibilities for disclosing beneficial interests in company shares, emphasizing designated persons and prompt disclosure. Companies must quickly integrate these changes to avoid legal consequences and maintain corporate governance integrity.

[1] https://www.mca.gov.in/bin/ebook/dms/getdocument?doc=Mzc2Nzk4OTY0&docCategory=Notifications&type=open