CS Lovkesh Batra

CS Lovkesh BatraComparative analysis of Definitions under Companies Act, 2013 and The Companies (Amendment) Bill, 2016

Corporate Affairs Minister Mr. Arun Jaitley on 17th March, 2016 introduced in the Lok Sabha The Companies (Amendment) Bill, 2016 to amend the Companies Act (i.e. the principal Act) in order to remove the difficulties faced by stakeholders.

The proposed changes are broadly aimed at addressing difficulties in implementation owing to stringency of compliance requirements and “ease of doing business”.

Some of  the major changes in the definition section are below mentioned:

SECTIONAS PER COMPANIES ACT, 2013AS PER COMPANIES AMENDMENT BILL (2016)SPECIFIC CHANGE
Sec 2(6)

Associate company”, in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company.

Explanation.—For the purposes of this clause, “significant influence” means control of at minimum 20 %  of total share capital, or of business decisions under an agreement;

Explanation.—For the purpose of this clause—

(a) the expression “significant influence” means control of at least 20% of total voting power, or control of or participation in business decisions under an agreement;

(b) the expression “joint venture” means a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

1. Earlier the word 20 % of the total share capital was used, now the word total voting power is used to specifically exclude (preference Shares)

2. New provision add on for participation in business decisions under an agreement

3. Specific definition of JOINT VENTURE is given.

2(28)

“cost accountant” means a cost accountant as defined in clause (b) of subsection (1) of section 2 of the Cost and Works Accountants Act, 1959;

“Cost Accountant” means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 and who holds a valid certificate of practice under sub-section (1) of section 6 of that Act;’;

1. who holds a valid certificate of practice under sub-section (1) of section 6 of that Act; is added in the definition.

2(30)

“debenture” includes debenture stock, bonds or any other instrument of a   company evidencing a debt, whether constituting a charge on the assets of the company or not;

the following proviso shall be inserted, namely:—

“Provided that—

(a) the instruments referred to in Chapter III-D of the Reserve Bank of India Act, 1934; and

(b) such other instrument, as may be prescribed by the Central Government in consultation with Reserve Bank of India, issued by a company,

shall not be treated as debenture;”;

1.  Exception in the definition of Debenture is introduced.

2(41)financial year”, in relation to any company or body corporate, means the period ending on the 31st day of March every year, and where it has been incorporated on or after the 1st day of January of a year, the period ending on the 31st day of March of the following year, in respect whereof financial statement of the company or body corporate is made up:

Provided that on an application made by a company or body corporate, which is a holding company or a subsidiary of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Tribunal may, if it is satisfied, allow any period as its financial year, whether or not that period is a year:

in the first proviso, after the word “subsidiary”, the words “or associate company” shall be inserted;

1. Now if the associate company of the Company is incorporated outside India whose FY is different. Then the company can also follow such FY subject to CLB approval.

2(46)

“holding company”, in relation to one or more other companies, means a Company of which such companies are subsidiary companies.

the following Explanation shall be inserted, namely:—

‘Explanation.—For the purposes of this clause, the expression “company” includes any body corporate;’

1. Body Corporate will also be covered in the definition of Holding Company.

2(49)

“Interested director” means a director who is in any way, whether by himself or through any of his relatives or firm, body corporate or other association of individuals in which he or any of his relatives is a partner, director or a member, interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into by or on behalf of a company;

(49) shall be omitted;
2(51)

“key managerial personnel”, in relation to a company, means—

(i) the Chief Executive Officer or the managing director or the manager;

(ii) the company secretary;

(iii) the whole-time director;

(iv) the Chief Financial Officer; and

(v) such other officer as may be prescribed

(a) in sub-clause (iv), the word “and” shall be omitted;

(b) for sub-clause (v), the following sub-clauses shall be substituted, namely:—

“(v) such other officer, not more than one level below the directors who is in whole-time employment, designated as key managerial personnel by the Board; and

(vi) such other officer as may be prescribed;”;

1. such other officer, not more than one level below the directors who is in whole-time employment, designated as key managerial personnel by the Board;

(NEW DESIGNATION IN IS KMP INCLUDED)

2(57)

“net worth” means the aggregate value of the paid-up share capital and all reserves created out of the profits and securities premium account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation;

for the words “and securities premium account”, the words

“, securities premium account and debit or credit balance of profit and loss account,” shall be substituted;

 EARLIER : Paid up + all reserves created out of profit(except reserves created out of revaluation of assets, write-back of depreciation and amalgamation)  + SPA – accumulated losses – deferred expenditure and miscellaneous expenditure not written off

NOW:  Paid up + all reserves created out of profit(except reserves created out of revaluation of assets, write-back of depreciation and amalgamation)  + SPA + debit or credit balance of profit and loss account – accumulated losses – deferred expenditure and miscellaneous expenditure not written off

2(71)

public company” means a company which—

(a) is not a private company;

(b) has a minimum paid-up share capital of five lakh rupees or such higher

paid-up capital, as may be prescribed:

in sub-clause (a), after the word “company;”, the word “and” shall be inserted;

“Better Clarification”

2(76)

Definition of Related party

(vii) any body corporate which is—

(A) a holding, subsidiary or an associate company of such company;

(B) a subsidiary of a holding company to which it is also a subsidiary;

Or

(C) an investing company or the venturer of a company;”;

New provision in the definition of related party is added.

2(85)

“small company’’ means a company, other than a public company,—

(i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than five crore rupees; or

(ii) turnover of which as per its last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than twenty crore rupees:

Provided that nothing in this clause shall apply to—

(A) a holding company or a subsidiary company;

(B) a company registered under section 8; or

(C) a company or body corporate governed by any special Act;

 

(a) in sub-clause (i), for the words “five crore rupees”, the words “ten crore rupees” shall be substituted;

(b) in sub-clause (ii),—

for the words “as per its last profit and loss account”, the words “as per profit and loss account for the immediately preceding financial year” shall be substituted;

(B) for the words “twenty crore rupees”, the words “one hundred crore rupees” shall be substituted;

1. Power of CG is increased for increasing the limit of small company by :

·         5 crore —] 10 crore

·         25 crore —] 100 crore

2. Profit as per previous FY is to be taken care.

 

 

2(87)

“subsidiary company” or “subsidiary”, in relation to any other company

(that is to say the holding company), means a company in which the holding company—

(i) controls the composition of the Board of Directors; or

(ii) exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies:

Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed (OMITTED).

Explanation.—For the purposes of this clause,—

(a) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company;

(b) the composition of a company’s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors

(c) the expression “company” includes any body corporate;

(d) “layer” in relation to a holding company means its subsidiary or subsidiaries; (OMITTED)

(a) in sub-clause (ii), for the words “total share capital”,the words “total voting power” shall be substituted;

(b) the proviso shall be omitted;

(c) in the Explanation, item (d) shall be omitted;

1. In the definition of Subsidiary the role of preference shares has been removed.

2.  Now no concept of layers in case of subsidiary company.

2(91)

“turnover” means the aggregate value of the realisation of amount made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year

the following clause shall be substituted, namely:—

‘(91) “turnover” means the gross amount of revenue recognised in the profit and loss account from the sale, supply, or distribution of goods or on account of services rendered, or both, by a company during a financial year;’.

taking turnover as “revenue for business operations”

Conclusion: In order to conclude the above analysis, we can say that the above changes are brought down in order to “ease of doing business”.

 

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Tags : Companies Act (1523) Companies Act 2013 (1277)
  • Rajaningappa

    what is the relief to small companies u/s 2(85) having increased the cap from 5 crore to 10 crore rupees and turnover from 20 crore to 100 crore as per amendment act 2016 please highlight on this

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