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» » MCA issues clarification on transitional period for resolutions passed under the Companies Act, 1956

Background
One of the contentious issues while implementing corporate decisions is the validity of the resolutions passed under the provisions of the Companies Act, 1956 (“1956 Act”) post implementation of the provisions of the Companies Act, 2013 (“2013 Act”).

First Phase of 98 sections of 2013 Act were notified on September 12, 2013. On February 27, 2014 Section 135 and schedule VII dealing with CSR was notified. Further on March 26, 2014 further 196 sections of 2013 Act were notified.

The above notifications of provisions of the 2013 Act, from time to time, raised doubts as to the fate of resolutions passed under 1956 Act and transactions initiated before notification of the new provisions.

MCA Circular
MCA on July 23, 2014 vide General Circular No 32/2014 clarified that resolutions passed under the relevant provisions of 1956 Act during the period from September 1, 2013 to March 31, 2014 can be implemented in accordance with the provisions of 1956 Act notwithstanding the repeal of the said provisions, provided implementation of the resolutions commenced before April 1, 2014. This transitional arrangement will be available up to expiry of one year from the passing of the resolution or six months from the commencement of the corresponding provision in 2013 Act, whichever is later. Further any amendment of the resolution must be in accordance with the relevant provision of the New Act.

Our Analysis
Various scenario and the clarified position are captured below :
Resolution Status

Resolution passed before 01-Sep-2013


Resolution passed during 01-Sep-2013 and 31-Mar-14 and implementation commenced pre 01-04-14

Resolution passed during 01-Sep-2013 and 31-Mar-14 but implementation did not commenced pre 01-04-14
Clarified Position

Invalid. New resolution to be passed under 2013 Act

Valid until expiry of 1 year from passing of the resolution or 6 months from the commencement of the corresponding provision in 2013 Act, whichever is later

Invalid. New resolution to be passed under 2013 Act
Download MCA Circular

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