MAHARASHTRA APARTMENT OWNERSHIP (AMENDMENT) BILL, 2018

The Maharashtra Apartment Ownership (Amendment) Bill, 2018 (Bill) has been recently introduced before the Legislative Assembly proposing to amend the Maharashtra Apartment Ownership Act, 1970 (Act). This update briefly summarises the changes proposed in the Bill.

1. Change in the definition of apartment: The definition of “apartment” is proposed to be modified on the lines of the Real Estate (Regulation and Development) Act, 2016 to mean a separate and self-contained part of any immovable property. The Act requires an apartment to have a direct exit to a public street, road or highway or to a common area leading to such public street, road or highway which is no longer required under the Bill.
2. Requirement of majority consent: In the following areas, the Bill now proposes only the consent of a majority of the apartment owners unlike the Act which requires consent of all the apartment owners:
   • alteration of the undivided interest of each apartment owner in the common areas and facilities;
     
     
   • re-development of a building. Re-development is not contemplated under the Act;
     
     
   • any work which would jeopardize the soundness or safety of the property, reduce the value thereof or impair any easement or hereditament or for adding any material structure or to excavate any additional basement or cellar;
     
     
   • removal of property under Section 14 of the Act;
     

3. Contents of Declaration: Under the Bill, the Declaration must include provisions as to percentage of majority of votes by apartment owners which shall be determinative of whether to rebuild, repair, restore or sell the property in the event of damage or destruction of all or part of the property. Presently, a Declaration in the Act consists of only percentage of votes and not percentage of majority of votes.
   
   
4. Repair of damaged property: Under the Bill, within sixty days of the date of damage or destruction to all or part of the property, the Association of Apartment Owners by majority must repair the property otherwise the property is deemed to be owned in common by the apartment owners. Under the Act this task is entrusted to the Association of Apartment Owners.

MHCO COMMENT:

The Bill has been introduced to address the urgent need of repair and re-construction of certain buildings covered by the Act. It has been extremely challenging to obtain the consent of all the members of the Association of Apartment Owners for such purpose. If such buildings are not re-constructed or re-developed in time, there is a likelihood of risk of life to the residents of such buildings. With a view to overcome such problems and difficulties, the Bill has been proposed to ease the process of repair/re-construction/re-development of dilapidated buildings, after obtaining the consent of majority of apartment owners.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.

 

NEW MAHARASHTRA SHOPS AND ESTABLISHMENTS ACT 2017 AND RULES

The Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017 (New Act) was published in the Official Gazette on 7 September 2017 and came into effect on 19 December 2017, thereby repealing the Bombay Shops and Establishments Act, 1948 (Old Act). Pursuant to the New Act, the Government of Maharashtra published the draft Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Rules, 2018 (Rules) for public comment on 2 February 2018.

The New Act and Rules have brought about significant changes in the regulations governing the running of shops and establishments by its employers which are as follows:

• Online Registration and Maintenance of Registers: Under the New Act, the registration of a shop or establishment has to be done online and the registers prescribed under the New Act can be maintained electronically. The Old Act did not provide for online maintenance of registers by the shop or establishment.
• Opening and Closing Hours of Establishment: Under the New Act, the State Government may fix the hours for opening and closing of different classes of establishment or for different areas and for different periods. The Old Act prescribed fixed timings for the opening and closing of shops and establishments.
• Working Hours for Women: Under the Old Act, women workers were prohibited from working in any establishment after 9.30 pm. The New Act and Rules provide that women workers may consent to work between 9.30 pm. and 7.00 am. in any establishment where the employer ensures adequate protection of their dignity, safety, protection from sexual harassment and their transportation from the establishment till their residence.
• Accumulated Leave and Holidays: Under the New Act, every worker is entitled to accumulate earned leave for upto 45 days as compared to the Old Act which allowed only 42 days accumulated leave. Further, the paid festival holidays have increased from 4 to 8 under the New Act.
• Overtime Wages: Under the New Act, if a worker is required to work beyond 9 hours a day or 48 hours a week, he is entitled to overtime wages at the rate of twice his ordinary wages in respect of the overtime work. The Old Act did not provide for such overtime wages.
• Creche Facility: The New Act provides for the maintenance of a suitable room as a creche for the children of workers in an establishment where 50 or more workers are employed. The Old Act did not provide for the provision of such creche facility.
• Health, Safety and Welfare Committee: Under the Rules, every establishment employing 100 or more workers, must constitute a health, safety and welfare committee to examine accident prone spots in the premises, conduct health care or wellness camps, conduct recreational or sports activities and other functions as prescribed under the Rules. The Old Act and rules did not provide for such committee to be formed in a shop or establishment.
• Managerial Functions: Under the Rules, every employer shall intimate the Facilitator appointed in terms of the New Act of the name, designation and brief nature of duties of persons discharging managerial functions such as power to sanction leave, award increment, take disciplinary action, suspend workers etc.
• Latrine and Urinal Facility: Under the Rules, every employer must provide neat and clean latrine and urinal facilities for men and women workers separately which must be well ventilated and lighted as well as safe for women workers and also have proper provision of water supply and flushing of waste. Such facilities were absent in the Old Act and rules.
• Compounding of Offences: The New Act provides for compounding of offences which are punishable with fines, by the Compounding Officer appointed by the State Government. The Compounding Officer must pass a detailed order within 7 days of receipt of the application. The fees for compounding is a minimum of 75% of the maximum fine specified for such offense under the New Act.
• Increase of Fines: The maximum amount of fine was Rs 15,000 for offences under the Old Act. However, under the New Act, the fines for contravention have been increased and may be upto a maximum amount of Rs 5,00,000.

MHCO COMMENT:

The New Act along with the Rules have brought about progressive developments in the regulation of shops and establishments in Maharashtra by inter alia placing obligations on employers to ensure safety for women workers who wish to work during night shifts and by making the employer responsible for providing creche facilities. Further, the New Act and Rules also provide for digitalization of the Registers to be maintained by the shop or establishment and provides the employers with a second chance by permitting them to apply for compounding of offences. The reformist provision under the New Act is the flexibility in the opening and closing hours of different classes of establishments which may be decided by the Government and such facility may benefit the public as well. However, the present Rules have only been published for public comments and only upon its notification, will its benefit pass on to the public at large.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance

 IMPORTANT AMENDMENTS TO COMPANIES ACT, 2013

The Companies (Amendment) Act, 2017 (Amendment Act) which recently received the President`s assent, brings about much needed modifications to the Companies Act, 2013 (Act) to govern companies in a more transparent and efficient manner.

This update endeavours to summarise some of the important amendments brought about by the Amendment Act:

• Associate Company and Joint Venture Company - Section 2(6): The Amendment Act has altered the definition of associate company wherein the term significant influence means control of at least 20% of the total voting power, or control of, or participation in business decisions under an agreement as opposed to the earlier definition which included control of 20% of the total share capital. The Amendment Act has also defined joint venture to mean a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.
• Related Party - Section 2(76): The term related party, with reference to a company, now includes any body corporate whose investment in the company would result in the company becoming an associate company of the body corporate.
• Subsidiary Company - Section 2(87): The definition of subsidiary company has been amended to mean a company in which the holding company controls more than one half of the total voting power either on its own or with other subsidiaries as opposed to the earlier definition which included control over one half of the total share capital.
• Debentures - Section 2(30): The definition of debentures now specifically excludes the instruments referred to in Chapter III-D of the Reserve Bank of India Act, 1934 (derivatives, money market instruments etc); and (b) such other instrument issued by a company, as prescribed by the Central Government in consultation with the Reserve Bank of India.
• Several liability of members - Section 3A: A new section has been inserted wherein if the number of members of a public company is reduced below 7 and in case of a private company below 2, then the members during that time who were cognisant of the said reduction, shall be severally liable for the debts of the company if it carries on business for more than 6 months after such reduction.
• Private Placement - Section 42: The Amendment Act contains an express provision by which a company shall not utilise monies raised through private placement unless allotment is made and the return of allotment is filed with the Registrar of Companies. Further, it clarifies that the private placement offer and application shall not carry any right of renunciation.
• Beneficial Interest in shares - Section 89: This term is defined to include, directly or indirectly, through any contract, arrangement or otherwise, the right or entitlement of a person alone or together with any other person to— (i) exercise or cause to be exercised any or all of the rights attached to such share; or (ii) receive or participate in any dividend or other distribution in respect of such share.
• Register of significant beneficial owners - Section 90: Every person holding a beneficial interest of more than 25% of the shares of a company (significant beneficial owner) shall make a declaration to the company specifying the nature of his interest and other particulars and the company is required to maintain a register of beneficial owners and file a return of significant beneficial owners. This is an additional register now required to be maintained pursuant to the Amendment Act.
• Resident Director - Section 149: The requirement of having a resident director has changed from calendar year to financial year.
• Independent Director - Section 149: Earlier, the independent director could not have any pecuniary relationship with the company, holding company, subsidiary or associate company. Under the Amendment Act, an independent director can now have a pecuniary relationship not exceeding 10% of his total income with the company, its holding, subsidiary or associate company etc during the two immediately preceding financial years or during the current financial year. Further, no person can be an independent director if his relative, during the two immediately preceding financial years or during the current financial year, is (i) holding any security or interest in the company exceeding Rs 50,00,000/- or 2% of the paid-up capital of the company, its holding, subsidiary or associate company, (ii) is indebted to the company, its holding, subsidiary or associate company, (iii) has given guarantee or provided security in connection with the indebtedness of any third person to the company, its holding, subsidiary or associate company (iv) has any other pecuniary transaction or relationship with the company its holding, subsidiary or associate company, amounting to 2% or more of its gross turnover or total income singly or in combination with the transactions referred to in clause (i), (ii) or (iii) above. Further, if such relative is an employee, then the above restrictions shall not apply for his employment during the preceding 3 financial years.
• Audit Committee - Section 177: Under the Amendment Act, the audit committee shall also have power to make recommendations to the board of directors in respect of other transactions (i.e. other than related party transactions) which they do not approve. This will make the board of the company accountable for vulnerable transactions which do not require approval under Section 188 of the Act.
  Further, the audit committee has the power to make a related party transaction (“RPT”) voidable if such transaction does not exceed Rs 1,00,00,000/- and was entered into by a director or officer of the company without obtaining approval of the audit committee and was not ratified by the audit committee within 3 months from the date of the transaction. If such transaction is with the related party to any director, then the director concerned shall indemnify the company against any loss incurred by it. This amendment relaxes the pre- requisite approval requirement of the Audit Committee for the RPTs.
• Loan to Directors - Section 185: The Amendment Act completely substitutes the existing Section 185 of the Act. The new section now only restricts loan to certain persons and firms.
• Loans and investments by company - Section 186: The Amendment Act substitutes Section 186 (3) which now permits the company to grant a loan, guarantee or security (i) exceeding 60% of the paid-up share capital, free reserves and securities premium account; or (ii) 100% of its free reserves and securities premium account; whichever is higher, to its: (a) wholly owned subsidiary company; (b) joint venture company; and for investing in a wholly owned subsidiary company.
• Related Party Transactions - Section 188: Under the Amendment Act, where 90% or more members in a company are relatives of promoters or related parties, such members shall be allowed to vote on such special resolution to approve any contract or arrangement which may be entered into by the company with the related party.
• Managerial Remuneration - Section 197: Under the Amendment Act, the increase in the managerial remuneration payable by a public company does not require approval of the Central Government and authorisation by the members in a general meeting is sufficient.

MHCO COMMENT:

The Amendment Act has brought about significant changes which eliminate some of the superfluous provisions such as approval of Central Government for increase in managerial remuneration, approval of the members by a special resolution for loans given by a company to its subsidiary or joint venture company etc. Further, the Amendment Act brings clarity on various terms which were earlier ambiguous thereby addressing the numerous concerns raised by various stakeholders on the Act.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.