jay081767 | Feb 28, 2020 |
Analysis of change in existing clauses of CARO
Apart from the addition of various new reporting clauses in CARO, 2020, there were many clauses which were adopted from the previous CARO, 2016 as it is or with some amendments. In this article we’ll analyse all those clauses which were adopted from CARO, 2016 either with some amendment or not.
Amendment in existing clauses of CARO, 2016 in CARO, 2020
Analysis of change in existing clauses of CARO
| CARO, 2016 | CARO, 2020 | Analysis | ||
| 3(i)(a) | “Whether the company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets” | 3(i)(a)(A) | “Whether the company is maintaining proper records showing full particulars, including quantitative details and situation of Property, Plant and Equipment” | Word “fixed assets” has been changed to “Property, Plant and Equipment” to make order congruent with the accounting standards. Similar changes has also been done in clauses 3(i)(b). |
| 3(i)(c) | Whether the title deeds of immovable properties are held in the name of the company. If not, provide the details thereof” | 3(i)(c) | “Whether the title deeds of all the immovable properties (other than properties where the company is the lessee and the lease agreements are duly executed in favour of the lessee) disclosed in the financial statements are held in the name of the company, if not, provide the details thereof” | Exclusion has been added to the clause i.e. leasehold properties. Further, a format has been added in the order under this clause to give the details of deeds not held in the name of the company. Format has been given after the table in Annexure-1. |
| 3(ii) | “Whether physical verification of inventory has been conducted at reasonable intervals by the management and whether any material discrepancies were noticed and if so, whether they have been properly dealt with in the books of account” | 3(ii)(a) | “Whether physical verification of inventory has been conducted at reasonable intervals by the management and whether, in the opinion of the auditor, the coverage and procedure of such verification by the management is appropriate; whether any discrepancies of 10% or more in the aggregate for each class of inventory were noticed and if so, whether they have been properly dealt with in the books of account” | Earlier material discrepancies were left on the judgement of the auditors but now it needs to be reported if discrepancies id of 10% or more. |
| 3(iv) | “In respect of loans, investments, guarantees, and security whether provisions of section 185 and 186 of the Companies Act, 2013 have been complied with. If not, provide the details thereof” | 3(iv) | “In respect of loans, investments, guarantees, and security whether provisions of section 185 and 186 of the Companies Act, 2013 have been complied with. If not, provide the details thereof” | No change |
| 3(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, 2013 and the rules framed thereunder, where applicable, have been complied with? If not, the nature of such contraventions be stated; If an order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal, whether the same has been complied with or not?” | 3(v) | “In respect of deposits accepted by the company or amounts which are deemed to be 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 made thereunder, where applicable, have been complied with, if not, the nature of such 5 contraventions be stated; if an order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal, whether the same has been complied with or not” | Scope of coverage has been widened by including the reporting of amounts which are deemed to be deposits. |
| 3(viii) | Whether the company has defaulted in repayment of loans or borrowing to a financial institution, bank, Government or dues to deben ture holders? If yes, the period and the amount of default to be reported (in case of defaults to banks, financial institutions, and Government, lender wise details to be provided). | 3(ix)(a) | “Whether the company has defaulted in repayment of loans or other borrowings or in the payment of interest thereon to any lender, if yes, the period and the amount of default to be reported as per the format given” | Instead of words “to a bank, financial institutions, government or dues to debenture holders?” words “to any lender has been substituted. Further, format has been prescribed for reporting which is given under Annexure-2. |
| 3(ix) | “Whether moneys raised by way of initial public offer or further public offer (including debt instruments) and term loans were applied for the purposes for which those are raised. If not, the details together with delays or default and subsequent rectification, if any, as may be applicable, be reported” | 3(ix)(c) | “Whether term loans were applied for the purpose for which the loans were obtained; if not, the amount of loan so diverted and the purpose for which it is used may be reported” | Clause 3(ix) has been split up into two parts two clauses. Term loan has been separated and a new clause has been made for the same keeping all the reporting requirements unchanged. |
| 3(x)(a) | “Whether moneys raised by way of initial public offer or further public offer (including debt instruments) during the year were applied for the purposes for which those are raised, if not, the details together with delays or default and subsequent rectification, if any, as may be applicable, be reported” | |||
| 3(x) | “Whether any fraud by the company or any fraud on the Company by its officers or employees has been noticed or reported during the year; If yes, the nature and the amount involved is to be indicated” | 3(xi)(a) | “Whether any fraud by the company or any fraud on the company has been noticed or reported during the year, if yes, the nature and the amount involved is to be indicated” | Words “by its officers or employees” has been removed which widens the scope of the coverage of clause. |
| 3(xi) | “Whether managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act? If not, state the amount involved and steps taken by the company for securing refund of the same” | – | – | This clause has been deleted from the new CARO, 2020. |
| 3(xii) | “Whether moneys raised by way of initial public offer or further public offer (including debt instruments) and term loans were applied for the purposes for which those are raised. If not, the details together with delays or default and subsequent rectific cation, if any, as may be applicable, be reported” | 3(xii)(a) and (b) | “(a) whether the Nidhi Company has complied with the Net Owned Funds to Deposits in the ratio of 1: 20 to meet out the liability; (b) whether the Nidhi Company is maintaining ten per cent. Unencumbered term deposits as specified in the Nidhi Rules, 2014 to meet out the liability” | This clause has been split up into two sub-clauses without any change. |
| 3(xiii) | “Whether all transactions with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the Financial Statements etc., as required by the applicable accounting standards” | 3(xiii) | No change | No Change |
| 3(xiv) | “Whether the company has made any preferentialallotment or private placement of shares or fully or partly convertible debentures during the year under review and if so, as to whether the requirement of section 42 of the Companies Act, 2013 have been complied with and the amount raised have been used for the purposes for which the funds were raised. If not, provide the details in respect of the amount involved and nature of non-compliance” | 3(x)(b) | This clause has been shifted to clause 3(x)(b) without any change. | No change |
| 3(xv) | “Whether the company has entered into any non-cash transactions with directors or persons connected with him and if so, whether the provisions of section 192 of Companies Act, 2013 have been complied with” | 3(xv) | No change | No change |
| 3(xvi) | “Whether the company is required to be registered under section 45-IA of the Reserve Bank of India Act, 1934 and if so, whether the registration has been obtained” | 3(xvi)(a) | This clause has been shifted to clause 3(xvi)(a) without any change | No change |
Annexure-1
| Description of property | Gross carrying value | Held in name of | Whether promoter, director or their relative or employee | Period held – indicate range, where appropriate | Reason for not being held in name of company* |
| *also indicate if in dispute |
Annexure-2
| Nature of borrowing, including debt securities | Name of lender* | Amount not paid on due date | Whether principal or interest | No. of days delay or unpaid | Remarks, if any |
| *lender wise details to be provided in case of defaults to 6 banks, financial institutions and Government |
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