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The SEBI, through informal guidance by way of an interpretative letter, has clarified that in order to be exempt from the compliance of the corporate governance provisions, a listed entity would need to have a paid-up capital of less than ? 10 crores and a net worth not exceeding? 25 crore.
Brief Facts
In the instant case, Mr Maikal Raorani, Whole Time Director and CFO of Sky Industries Limited sought Informal guidance by way of an interpretive letter under the provisions of the SEBI (Informal Guidance) Scheme, 2003.
The company was incorporated under the Companies Act, of 1956 and listed on BSE Limited. The corporate governance provisions of the LODR regulations shall apply to those entities whose paid-up capital exceeds? 10 crore and net-worth exceed? 25 crores. As on March 31, 2022, the paid-up equity share capital of the Company is ? 6.85 crores and the net worth of the Company is ? 32.87 crore.
Pursuant to regulation 15(2) of the LODR Regulations, compliance with the corporate governance provisions shall not apply, upon fulfilment of two conditions namely - (a) a listed entity having paid up equity share capital not exceeding rupees ten crores; and (b) net worth not exceeding rupees twenty-five crore, as on the last day of the previous financial year, which are used in the provision conjunctively and not disjunctively.
Therefore, in order to be exempt from the compliance of the corporate governance provisions, a listed entity would need to have a paid-up capital of less than ? 10 crores and a net worth not exceeding? 25 crore.
The question raised before the SEBI
Since, only Net worth exceeded the threshold limit, company sought guidance on the applicability of corporate governance provisions of the LODR Regulations under the aforesaid circumstances and question was raised that whether the Company is eligible to claim exemptions from the provisions?
SEBI’s reply
The SEBI clarified that since the paid-up equity share capital of the Company is 6.85 crores and the net worth of the company is 32.87 crores as on March 31, 2022. As the net worth of the Company is above 25 crores as on March 31, 2022, the provisions relating to Corporate Governance of LODR Regulations shall be applicable to the Company.
In the instant case, respondent no. 1-operational creditor/managing director of the appellant-corporate debtor filed an application under section 9 for initiation of a Corporate Insolvency Resolution Process (CIRP) against the corporate debtor on the ground that he was entitled to Rs. 3 Lakhs per month as remuneration.
The payment was also short of the agreed sum for which it was stated that the shortfall in the salary of the MD would be paid when the financial position of the company would improve. Later, the MD was removed by the 'corporate debtor' without clearing his salary dues.
The NCLT by the impugned order admitted said application filed by the operational creditor. On appeal, the appellant contended that MD had sought to calculate the alleged shortfall in his salary by taking an imaginary figure which was neither approved nor agreed to nor was it supported by any documents such as an Employment Agreement or a Board Resolution.
The appellant further contended that the application filed under section 9 showed that the principal amount of alleged operational debt was the amount shown as due for the period 16-1-2010 to 31-7-2014, which amount was barred by limitation as the application was filed on 27-8-2021.
Hon’ble NCLAT observed that since the remuneration of the operational creditor was a disputed question of fact, it was not within the domain of NCLT under IBC to decide the issue of fixation of the salary of the operational creditor but to ascertain if there was any dispute regarding the issue.
It was further observed that since e-mails, correspondence relied upon by operational creditors did not give any definitive quantum of salary by way of any resolution by the board of directors, to fall within the ambit of the definition of acknowledgement of debt as contemplated under section 18 of Limitation Act, section 9 application filed on 27-8-2021 was barred by limitation as claims and amount pertained to period prior to 31-3-2016 and more than three years had lapsed since.
Further, it was held that since e-mails, correspondence and minutes on record, showed that the dispute raised was not a feeble legal argument nor was it a spurious one but it was supported by evidence, the impugned order passed by the NCLT was to be set aside and appeal was to be allowed.
That’s it from us for today! Stay Tuned for more updates from?Taxmann.com
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