85 Changes brought by Companies(Amendment) Act, 2017

Aanchal Mundhra 27 May 2018 7,305 Views 0 comment Print Company Law | Articles

The Companies (Amendment) Act, 2017 which was passed by the Lok Sabha on July 27, 2017 and by the Rajya Sabha on December 19, 2017, has received the assent of the President of India on January 3, 2018 and subsequently published in the Gazette of India.

Certain provisions of the Companies (Amendment) Act, 2017 have been notified on 26^th January, 2018, 9^th February, 2018 and 7^th May, 2018 respectively. The details of the section which are now applicable are as follows:

Sl.No.

Section of Companies Act, 2013

Amendments

Section 2(6)- Definition of Associate Company

• In the definition of Associate Company the term significant influence would mean control of at least twenty per cent. of total voting power, or control of or participation in business decisions under an agreement as against twenty per cent of total share capital.

• The definition of joint venture has been added which has been defined as a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

Section 2(28)- Definition of ‘cost accountant’

There has been a change in definition of ‘cost accountant’.
Now,“Cost Accountant” would mean a person who is a member of the Institute of Cost and Works Accountants of India and who holds a valid certificate of practice.

Section 2(30)- Definition of ‘Debenture’

Under the definition of the term “debenture”, instruments referred to in Chapter III-D of the Reserve Bank of India Act, 1934 and such other instruments prescribed by the Central Government in consultation with the RBI are excluded.

Instruments in Chapter-III D mainly includes Derivatives, Money Market Instruments and Securities

Section 2(41)- Definition of ‘Financial year’

Now, even associate company of a company incorporated outside India can apply to the Tribunal for a different financial year.

Earlier this was available only for holding or subsidiary company of a company incorporated outside India.

Section 2(46)- Definition of ‘Holding Company’

For the purpose of definition of the term ‘holding company’, the expression “company” will include any body corporate.

The term body corporate includes a company incorporated outside India but does not include a Co-operative Society registered under any law relating to Co-operative Societies and any other body corporate(not being a company as defined in Companies Act, 2013) which the Central Government may by notification specify in this behalf.

Section 2(49)- Definition of ‘Interested director’

The definition of the term ‘Interested director’ has been deleted.

Section 2(51)- Definition of ‘Key Managerial Personnel’

Under the definition of the term “Key Managerial Personnel”, such other officer not more than one level below the directors who is in whole time employment and designated as KMP by the Board, has been included.

Section 2(57)- Definition of ‘net worth’

Now, even the debit or credit balance of profit and loss account will be included in the calculation of net worth.

Section 2(71)- Definition of ‘public company’

The word ‘and’ has been included in the definition for more clarity to clarify that a public company must satisfy both the conditions mentioned in the sub-section.

Section 2(72)- Definition of ‘public financial institution’

The Central Government may notify other institution which has been established or constituted by or under any Central or State Act other than the Companies Act, 2013 or previous Company Law after consultation with the RBI as “public financial institution”.

Section 2(76)- Definition of ‘Related Party’

Following two amendments have been made:

• Instead of only a company, any body corporate which is holding, subsidiary or an associate company of such company or a subsidiary of a holding company to which it is also a subsidiary or an investing company or venture of the Company, shall be considered as a related party.

• “An investing company or the venturer of the company” will mean a body corporate whose investment in the company would result in the company becoming an associate company of the body corporate.

Section 2(85)- Definition of ‘small company’

Following two amendments have been made:

• The maximum paid-up share capital amount which can be prescribed for the purpose of determining a company as a small company has been increased from five crore rupees to ten crore rupees and prescribed turnover amount from twenty crore rupees to one hundred crore rupees.

• Further turnover should be as per profit and loss account for the immediately preceding financial year and not as per its last financial year.

Section 2(87)- Definition of Subsidiary Company

In the definition, the term total share capital has been substituted with total voting power.

Hence, a Company would be a subsidiary if another company controls the composition of Board of Directors or exercises or controls more than one-half of the total voting power either at its own or together with one or more of its subsidiary companies.

Section 2(91)- Definition of ‘Turnover’

The definition of turnover has been changed to mean 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.

Section 3A- Members severally liable certain cases

A new section regarding liability of members in case number of members is reduced from statutory minimum, i.e. seven in the case of public company or two in case of a private company has been inserted.

If at any time the number of members of a company is reduced, in the case of a public company, below seven, in the case of a private company, below two, and the company carries on business for more than six months while the number of members is so reduced, every person who is a member of the company during the time that it so carries on business after those six months and is cognisant of the fact that it is carrying on business with less than seven members or two members, as the case may be, shall be severally liable for the payment of the whole debts of the company contracted during that time, and may be severally sued therefor.

Section 4-Memorandum

Following two amendments have been made:

• The period for reservation of name for a new company is substituted from sixty days from the date of the application to twenty days from the date of approval or such other period as may be prescribed.

• A new provision for existing companies is also provided. In case of an application for reservation of name or for change of its name by an existing company, the Registrar may reserve the name for a period of sixty days from the date of approval.

Section 21- Authentication of documents, proceedings and contracts

Apart from key managerial personnel and any officer of the company, an employee can also authenticate documents or sign contracts made by or on behalf of Company if authorized by the Board in this behalf.

Section 26-Matters to be stated in Prospectus

• The detailed list of contents as required to be mentioned in the prospectus under the Act has been omitted, apart from a declaration to the effect that there has been compliance with the provisions of Companies Act, 2013.

• Instead of detailed list of contents of the Prospectus, the prospectus shall state such information and set out such reports on financial information as may be specified by SEBI in consultation with the Central Government. Till the time SEBI specifies the information and reports on financial information, the regulations made by it under the SEBI Act, 1992, in respect of such financial information or reports on financial information shall apply.

Section 35- Civil liability for Mis-statements in prospectus

Section 35 has been amended to relieve the Director, promoter etc. from any civil liability if such person(s) has relied on a misleading statement made by an expert and he had reasonable ground to believe and did up to the time of the issue of the prospectus believe, that the person making the statement was competent to make it and that the said person had given the consent required and had not withdrawn it.

Section 47- Voting rights

Since a member who is a related party and is interested in the resolution to be passed under section 188 of the Companies Act, 2013 cannot vote on the same, it is clarified that the right of every member holding equity shares to vote on all resolutions placed before the meeting would be subject to sub-section (1) of section 188 of the Act as well.

Section 53- Prohibition on issue of shares at discount

Following two amendments have been made:

♠ The words “discounted price” have been replaced with the word “discount”.

♠ A new provision has been inserted whereby companies have been allowed to issue shares at a discount to its creditors when the debt of the Company is converted into shares in pursuance of any statutory resolution plan or debt restructuring scheme in accordance with any directions or guidelines or regulations specified by Reserve Bank of India under the Reserve Bank of India Act, 1934 or the Banking Regulation Act, 1949.

Section 54- Issue of Sweat Equity Shares

Now, sweat equity shares can be issued at any time after registration of the Company.

The provision debarring a Company to issue sweat equity shares before expiry of one year from the date of commencement has been omitted.

Section 62- Further issue of share capital

Following two amendments have been made:

♠ The requirement of compliance with section 42 in respect of the preferential offer has been provided in the section itself.

Earlier the applicability of section 42 was provided in the rules.

♠ Now, Right issue offer letter can be sent through courier or any other mode having proof of delivery apart from registered post, speed post or electronic mode.

Section 76A- Punishment for Contravention of Section 73 or Section 76

There has been amendment in the penalty in relation to non-compliance of provisions relating to acceptance of deposit which are as follows:

♠ The fine would be not less than rupees one crore or twice the amount of deposits accepted by the company, whichever is lower.

♠ Further an officer of the company who is in default shall be punishable with imprisonment and fine. Earlier it was imprisonment or fine.

Section 77- Duty to register Charges etc

A new provision has been added which states that this section shall not apply to such charges as may be prescribed in consultation with the Reserve Bank of India.

Section 78- Application for registration of Charge

Now, the person in whose favour the charge has been created can file the charge on the expiry of 30 days from the creation of charge where the company fails to file so. Earlier the charge holder could register the charge only in case the company failed to do so within the period specified under section 77, which is 300 days.

Section 89 (6),(7)- Declaration with respect of beneficial interest in any share

Earlier, return of beneficial interest declaration could also be filed on payment of additional fee within 270 days from the date by which it should have been filed. Now, the time limit of 270 days has been done away with and the return can be filed at any time on payment of prescribed additional fee.

Section 92(4),(5)- Annual Return

Time limit of 270 days within which annual return could be filed on payment of additional fee has been done away with. A company can file the annual return with ROC at any time on payment of prescribed additional fee..(The additional fee shall be Rs. 100/- per day after completion of sixty days.)

Section 100- Calling of Extraordinary General Meeting

It has now been specified that Extraordinary General Meeting (‘EGM’) of the Company other than wholly owned subsidiary of a company incorporated outside India shall be held at a place within India.

Section 101- Notice of meeting

It has been specified that a company can hold General Meeting at a shorter notice i.e not giving 21 days clear notice if the following is satisfied:

• In case of AGM, if consent is received by not less than ninety-five per cent of the members entitled to vote thereat;(There has been no change for AGM)

• In case of EGM of Company having a share capital, if consent is received by majority in number of members entitled to vote and who represent not less than 95% of paid-up share capital;

• In case of EGM of Company not having a share capital, if consent is received by members having not less than 95% of total voting power exercisable at the meeting;

Further, where any member of a company is entitled to vote only on some resolution or resolutions to be moved at a meeting and not on the others, then his vote with respect to shorter notice shall only be counted for the purpose of the resolution on which he can vote.

Section 110- Postal Ballot

The items required to be passed mandatorily by postal ballot may now be transacted at a general meeting, in case the company is mandatorily required to provide the facility of electronic voting.

Section 117- Resolution and Agreements to be filed

• Time limit of 270 days within which resolutions and agreements could be filed on payment of additional fee has been done away with. A company can file the resolutions and agreements with ROC at any time on payment of prescribed additional fee.

• The minimum fine for non-filing under this section for company and officer in default has been reduced from rupees five lakh to one lakh rupees and from rupees one lakh to rupees fifty thousand.

• Banking companies are exempted from filing resolutions with respect to grant of loans, giving of guarantee or providing of security in respect of loans in the ordinary course of its business.

Section 121- Report on Annual General Meeting

• Time limit of 270 days within which report on annual general meeting could be filed on payment of additional fee has been done away with. A company can file the report on annual general meeting with ROC at any time on payment of prescribed additional fee

Section 123- Declaration of dividend

Following changes have been made:

In computing profits any amount representing unrealized gains, notional gains or revaluation of assets and any change in carrying of an asset or of a liability on measurement of the asset or the liability at fair value shall be excluded.
In the case of inadequate or absence of profits, dividend can be declared out of accumulated profits earned by the company in previous years and transferred by the company to free reserves (The word “reserves” have been substituted with “free reserves”).
The Board of Directors of a company may declare interim dividend during any financial year or at any time during the period from closure of financial year till holding of the annual general meeting out of the surplus in the profit and loss account or out of profits of the financial year for which such interim dividend is sought to be declared or out of profits generated in the financial year till the quarter preceding the date of declaration of the interim dividend.
In case the company has incurred loss during the current financial year up to the end of the quarter immediately preceding the date of declaration of interim dividend, such interim dividend shall not be declared at a rate higher than the average dividends declared by the company during immediately preceding three financial years.

Section 129- Financial Statement

♠ The explanation providing that subsidiary includes associate company and joint venture has been deleted.

♠ The section has been amended to provide for consolidation of the accounts of associate companies in addition to its subsidiaries in the same form and manner as that of its own in accordance with applicable accounting standards.

♠ The company shall also attach along with its financial statement, a separate statement containing the salient features of the subsidiary and associate companies.

Section 130- Re-opening of accounts on court’s or tribunal’s orders

Following provisions has been inserted:

In addition to authorities already specified, any other person concerned shall be given notice before passing an order for re-opening of accounts and the court or the Tribunal shall also take into consideration the representations made by the other person.
Order for re-opening of accounts can be made upto eight financial years preceding the current financial year unless there is a specific direction under section 128(5) from the Central Government that the books of accounts may be kept for longer period in which case the books of account may be ordered to be re-opened for a longer period.

Section 132- Constitution of National Financial Reporting Authority

Following two amendments have been made:

The minimum fine in respect of professional or other misconduct has been reduced from ten lakh rupees to five lakh rupees.
The provisions regarding constitution of separate Appellate Authority under this section has been omitted and appeal against any order of NFRA shall lie before the National Company Law Appellate Tribunal in the prescribed manner.

Section 136- Right of member to copies of audited financial statement

Following amendments have been made:

♠ Copies of audited financial statements and other documents may be sent at shorter notice if it is so agreed by members-

Ø In case of Company having a share capital, if consent is received by majority in number of members entitled to vote and who represent not less than 95% of paid-up share capital;

Ø In case of Company not having a share capital, if consent is received by members having not less than 95% of total voting power exercisable at the meeting;

♠ Only listed companies shall place on its website, if any the separate audited accounts of its each subsidiary. Earlier all companies were required to comply this.

If the foreign subsidiary is statutorily required to prepare consolidated financial statement under any law of the country of its incorporation, the requirement of posting audited accounts of subsidiary shall be met if consolidated financial statement of such foreign subsidiary is placed on the website of the listed company.
If the foreign subsidiary is not required to get its financial statement audited, the holding listed company may place such unaudited financial statement on its website and where such financial statement is in a language other than English, a translated copy of the financial statement in English shall also be placed on the website.

♠ Every company having a subsidiary or subsidiaries shall provide a copy of separate audited or unaudited financial statements, as the case may be, as prepared in respect of each of its subsidiary to any member who asks for it.

Section 137- Copy of financial statement to be filed with Registrar

• Time limit of 270 days within which financial statement could be filed on payment of additional fee has been done away with under all the sub-sections. A company can file the financial statement with ROC at any time on payment of prescribed additional fee.(The additional fee shall be Rs. 100/- per day after completion of thirty days.)

• The filing of unaudited financial statements of foreign subsidiary which is not required to get its accounts audited along with a declaration to that effect has been allowed.

Section 139- Appointment of auditors

The requirement related to ratification of appointment of auditors by members at every annual general meeting has been omitted.

Section 140- Removal, Resignation of Auditor and giving of special notice

The fine in case of failure to file resignation by auditor in Form ADT-3 has been reduced to fifty thousand rupees or the remuneration of auditor whichever is less.

Section 141- Eligibility, Qualification and Disqualifications of Auditors

A person who, directly or indirectly, renders any service referred to in section 144 to the company or its holding company or its subsidiary company will not be eligible for appointment as Auditor.

Earlier the restriction was only on the person, whose subsidiary, associate company or any other form of entity is engaged as on the date of appointment in consulting and specialized services as provided in section 144.

Section 143- Powers and duties of auditors and auditing standards

Following two amendments have been made:

The auditors of holding company shall now have access to accounts and records of associate companies along with subsidiary companies.
The auditor’s report to include whether internal financial controls with reference to financial statement are in place and not in respect of internal financial control system.

Section 147- Punishment for contravention

Following amendments have been made:

♠ The maximum fine which can be imposed on an auditor has been revised from rupees five lakh to rupees five lakh or four times the remuneration of the auditor, whichever is less. If the auditor has contravened provisions knowingly or wilfully with the intention to deceive the company, shareholders, creditors or tax authorities, the amount of fine has been reduced to minimum of fifty thousand rupees but which may extend to twenty-five lakh rupees or eight times the remuneration of the auditor, whichever is less.

♠ The liability of auditor who is convicted of any default, has been restricted to pay the damages to the company, statutory bodies or authorities or members or creditors of the Company for loss arising out of incorrect or misleading statements made in the audit report.

Earlier the Auditor was liable to pay damages to any person concerned.

♠ In case of criminal liability of an audit firm, in respect of liability other than fine, the concerned partner or partners, who acted in a fraudulent manner or abetted or, as the case may be, colluded in any fraud shall only be liable.

Earlier the criminal liability was of the partner or partners concerned of the audit firm and the firm, jointly and severally.

Section 148- Central Government to specify audit of items of Cost in respect of Certain Companies

The words ‘cost accountant in practice’ has been substituted with the words ‘cost accountant’ and also the words ‘Institute of Cost and Works Accountants of India’ has been substituted with the words ‘Institute of Cost Accountants of India‘.

Section 149- Company to have Board of Directors

♠ While determining whether a director is resident in India, 182 days shall be computed with reference to the financial year. Previously it was calculated in reference to previous calendar year.Further in case of new companies, the requirement of period of 182 days shall apply proportionately at the end of the financial year in which it is incorporated.

♠ In the definition of Independent Director, the words ‘pecuniary relationship’ has been substituted by “pecuniary relationship, other than remuneration as such director or having transaction not exceeding ten per cent, of his total income or such amount as may be prescribed.

♠ While determining the eligibility for appointment as Independent director, the restriction related to pecuniary relationships with respect to relative of a director to include the following:

(i) is holding any security of or interest in the company, its holding, subsidiary or associate company during the two immediately preceding financial years or during the current financial year. Provided that the relative may hold security or interest in the company of face value not exceeding fifty lakh rupees or two per cent. of the paid-up capital of the company, its holding, subsidiary or associate company or such higher sum as may be prescribed;

(ii) is indebted to the company, its holding, subsidiary or associate company or their promoters, or directors, in excess of such amount as may be prescribed during the two immediately preceding financial years or during the current financial year;

(iii) has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, its holding, subsidiary or associate company or their promoters, or directors of such holding company, for such amount as may be prescribed during the two immediately preceding financial years or during the current financial year; or

(iv) has any other pecuniary transaction or relationship with the company, or its subsidiary, or its holding or associate company amounting to two per cent. or more of its gross turnover or total income singly or in combination with the transactions referred to in sub-clause (i), (ii) or (iii) above.

♠ The appointment of person as an independent director, whose relative is an employee during the three financial years immediately preceding the financial year, in which the person is proposed to be appointed as Independent Director is now allowed.

Section 152- Appointment of directors

Provisions may provide that in addition to DIN, a director may hold any other identification as may be prescribed by the Central Government under section 153.

Section 153- Application for allotment of Director Identification Number

The Central Government is now empowered to recognize any other identification number to be treated as director identification number.

Section 157- Company to inform Director Identification Number to Registrar

Time limit of 270 days within which a company could furnish DIN of all its directors on payment of additional fee has been done away with. A company can furnish DIN of all directors to ROC at any time on payment of prescribed additional fee

Section 160- Right of persons other than retiring directors to stand for directorship

Now, the requirement of deposit of rupees one lakh with respect to nomination of directors shall not be applicable in case of appointment of independent directors or directors nominated by nomination and remuneration committee or a director recommended by the Board of Directors of the Company, in the case of a company not required to constitute Nomination and Remuneration Committee.

Section 161- Appointment of Additional director, Alternate director and Nominee director

Following two amendments have been made:

♠ A person cannot be appointed as an alternate director if he is holding directorship in the same company.

Earlier if a person was holding alternate directorship, then he could not be appointed as an alternate director for any other director in the same Company.

♠ All companies may fill up the causal vacancy by the Board and casual vacancy filled by the Board shall be subsequently approved in the immediate next general meeting.

Earlier the provision for casual vacancy was applicable only for Public Company.

Section 164- Disqualification from Appointment of Director

♠ When a director is appointed in company which is in default of filing of financial statements or annual return or repayment of deposits or pay interest or redemption of debentures or payment of interest thereon or payment of dividend then such director shall not incur the disqualification for a period of six months from the date of his appointment.

♠ Disqualification arising due to conviction by court or order passed by court or tribunal or conviction related to section 188, shall continue to exist even if appeal or petition has been filed against the order of conviction or disqualification. Earlier, there were certain relaxation in case appeal or petition had been filed.

Section 165- Number of Directorship

The directorship in a dormant company shall not be included in reckoning the limit of directorships of 20 companies.

Section 167- Vacation of office of Director

♠ In case a director incurs any of disqualifications under section 164 (2) due to default of filing of financial statements or annual return or repayment of deposits or pay interest or redemption of debentures or payment of interest thereon or payment of dividend, then he shall vacate office in all the companies other than the company which is in default.

♠ The director shall not vacate office immediately where he becomes disqualified by an order of Court or Tribunal or he is convicted by court for an offence in certain cases where an appeal is preferred.

The following proviso has been inserted:

Provided that the office shall not be vacated by the director in case of orders referred to in clauses (e) and (f)—

“(i) for thirty days from the date of conviction or order of disqualification;

(ii) where an appeal or petition is preferred within thirty days as aforesaid against the conviction resulting in sentence or order, until expiry of seven days from the date on which such appeal or petition is disposed of; or

(iii) where any further appeal or petition is preferred against order or sentence within seven days, until such further appeal or petition is disposed of.”

Section 168- Resignation of Director

Filing of Form DIR-11 regarding forwarding of copy of resignation by director to the Registrar has been made optional.

Section 173- Meetings of Board

Participation of directors on restricted items at Board meetings through video conferencing or other audio-visual means has been allowed if there is quorum through physical presence of directors.

Section 177- Audit Committee

Instead of every listed company, every listed public company and such other class of Companies shall constitute an audit committee.
Transactions with Related party other than those prescribed under section 188, if not approved by Audit committee, will require the approval of Board of Directors.
In case any transaction involving any amount not exceeding one crore rupees is entered into by a director or officer of the company without obtaining the approval of the Audit Committee and it is not ratified by the Audit Committee within three months from the date of the transaction, such transaction shall be voidable at the option of the Audit Committee and if the transaction is with the related party to any director or is authorised by any other director, the director concerned shall indemnify the company against any loss incurred by it
Approval of audit committee with respect to transactions between a holding company and its wholly owned subsidiary company will only be required, if the transactions falls under section 188

Section 178- Nomination and Remuneration Committee and Stakeholder Relationship Committee

Instead of every listed company, every listed public company and such other class of Companies shall constitute a Nomination and Remuneration Committee (‘NRC’).
NRC will specify methodology for effective evaluation of performance of Board and committees and individual directors either by the Board, NRC or an independent external agency and NRC can review the implementation of evaluation system instead of just carrying out evaluation of every director’s performance.
Instead of disclosing the policy in the Board’s report, such policy shall be placed on the website of the company, if any and only the salient features of the policy and the changes therein need to be disclosed in the Board’s report.

Section 180- Restrictions on powers of board

Securities premium will be included along with paid-up share capital and free reserves for calculation of maximum limits on borrowing powers of the Board.

Section 184- Disclosure of interest by directors

Following two amendments have been made:

The minimum penalty with respect to failure by directors to disclose interest has been omitted, but maximum penalty of one lakh still exists.
Nothing contained in this section shall apply to any contract or arrangement entered into or to be entered into between two companies or between one or more companies and one or more bodies corporate where any of the directors of the one company or body corporate or two or more of them together holds or hold not more than two per cent. of the paid-up share capital in the other company or the body corporate.

Section 185- Loans todirectors, etc.

The changes which have been made are as follows:

• Now, loan can be given or security or guarantee in connection with the loan can be provided to person in whom any of the director is interested after passing of a Special Resolution in General Meeting. Provided that the explanatory statement should contain all the relevant relating to the matter.

• The explanation relating to person in whom any of the director is interested has been amended and it includes:

1. Any private company of which any such director is a director or member;

2. any body corporate at a general meeting of which not less than twenty-five per cent. of the total voting power may be exercised or controlled by any such director,or by two or more such directors, together; or

3. any body corporate, the Board of directors, managing director or manager,whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company.

• So, still no loan can be given or security or guarantee in connection with the loan can be provided to:

(a) any director of company, or of a company which is its holding company or any partner or relative of any such director; or

(b) any firm in which any such director or relative is a partner.

• Now, defaulting officer in the company along with the company and director or the other person to whom any loan is advanced or guarantee or security is given will be penalized.

• Previous exemption provided under section 185(1) continues to remain except that when company which in the ordinary course of its business provides loans or gives guarantees or securities for the due repayment of any loan and in respect of such loans an interest is charged at a rate not less than the rate of prevailing yield of one year, three year, five year or ten year Government security closest to the tenor of the loan.

Section 186- Loans and Investment by Company

♠ Employees have been excluded from the ambit of this section.

♠ Shareholders’ approval will not be required where a loan or guarantee is given or where a security has been provided by a company to its wholly owned subsidiary company or a joint venture company, or acquisition is made by a holding company, by way of subscription, purchase or otherwise of, the securities of its wholly owned subsidiary company in excess of the limits i.e exceeding 60% of its paid-up share capital, free reserves, the securities premium account or 100% of its free reserves and securities premium account, whichever is more. The details of such loan to be disclosed in the Financial Statement.

♠ Exemptions have been provided to certain Companies from complying with the provisions of this Section.

Section 188- Related Party Transactions

Following two amendments have been made:

♠ The requirement related to restriction on voting by related party in the general meeting shall not apply to a company in which ninety per cent or more members in numbers are relatives of promoters or related parties.

♠ Non-ratification of transaction shall be voidable at the option of the Board or shareholders, as the case may be.

Earlier it was only voidable at the option of the Board.

Section 194- Prohibition on Forward dealings in securities of company by director or Key Managerial Personnel

Omitted.

Section 195- Prohibition on Insider trading of securities

Omitted.

Section 223- Inspector’s report

A copy of inspector’s report shall be made available only to members, creditors or any other person whose interest is likely to be affected, on their request.

Earlier any person could make a request for the copy.

Section 236- Purchase of Minority Shareholding

The words ‘transferor company’ have been substituted with the words ‘company whose shares are being transferred‘.

Section 247- Valuation by Registered Valuers

The restriction on appointment of a registered valuer has been reduced by providing that registered valuer can be appointed for valuation of an asset apart from an asset in which he has a direct or indirect interest or becomes so interested during a period of three years prior to appointment as valuer or three years after valuation of assets.

Earlier restriction was there for appointment of registered valuer for undertaking valuation of any assets in which he has a direct or indirect interest or becomes so interested at any time during or after the valuation of asset.

Section 379- Application of Act to foreign companies

Following two amendments have been made:

Sections 380 to 386, 392 and 393 shall apply to foreign companies.
The Central Government is empowered to exempt any class of foreign companies from complying with the aforesaid provisions.

Section 384- Debentures, Annual Return, Registration of charges, books of account and their Inspection

Section 135 dealing with Corporate Social Responsibility shall also apply to foreign companies.

Section 391- Application of sections 34 to 36 and Chapter XX

The provisions relating to winding up contained in Chapter XX shall apply for closure of place of business of a foreign company in India as if it were a company incorporated in India in case such foreign company has raised monies through offer or issue of securities which have not been repaid or redeemed.

Section 403 (proviso to (1), (2))- Fee for filing etc.

Where a company fails or commits any default to submit, file, register or record any document, fact or information before the expiry of the period specified in the relevant section, the company and the officers of the company who are in default, shall, without prejudice to the liability for the payment of fee and additional fee, be liable for the penalty or punishment provided under this Act for such failure or default.

Section 409- Qualification of President and Members of Tribunal

Following two amendments have been made with respect to eligibility for appointment as technical members:

♠ Instead of Joint Secretary to the Government of India, person who has been holding the rank of Secretary or Additional Secretary to the Government of India, will be eligible.

♠ A person of proven ability, integrity and standing having special knowledge and professional experience of not less than fifteen years in industrial finance, industrial management, industrial reconstruction, investment and accountancy will be eligible.

Expertise in other disciplines like law, labour laws, and disciplines related to management, conduct of affairs, revival, rehabilitation and winding-up of companies are have been deleted.

Section 410- Constitution of Appellate Tribunal

In addition to the order of the Tribunal, the order of the National Financial Reporting Authority shall be appealable before the National Company Law Appellate Tribunal.

Section 411- Qualifications of Chairperson and Members of Appellate Tribunal

Eligibility for appointment as Technical member has been brought in sync with the amendment made in section 409.

Section 412- Selection of Members of Tribunal and Appellate Tribunal

Following two amendments have been made:

• The Secretary in the Department of Financial Service in the Ministry of Finance has been removed as a Member of the Selection Committee.

• Where in a meeting of the Selection Committee, there is equality of votes on any matter, the Chairperson shall have a casting vote.

Section 435- Establishment of Special Courts

♠ Central Government authorized to establish Special Courts for the purpose of speedy trials of offences under the Act. Previously Special Court could be established for trying offences punishable with imprisonment of two years or more.

♠ The constitution of Special Court has been changed and will depend upon the nature of offence

Section 438- Application of Code to proceedings before a Special Court

Now, in cases of proceeding of Code of Criminal Procedure, the Special Court will be deemed to be Court of Session or the court of Metropolitan Magistrate or a Judicial Magistrate of the First Class.

Section 439- Offences to be Non- Cognizable

Member along with shareholders has been included in respect of complaint with respect to taking cognizance of offences under the Act by the Court.

Section 440- Transitional Provisions

Till the time a Special Court is established, the trial of offences shall be continued with Court of Session or Court of Metropolitan Magistrate or a Judicial Magistrate of the First Class.

Section 441- Compounding of certain offences

Now, the Tribunal has been empowered to compound offences punishable with fine only as well as offences punishable with fine or imprisonment.

Section 446A- Factors for determining level of punishment

New section has been inserted providing for the following factors which the court or special court will consider while determining level of punishment:

size of the company;
Nature of business carried on by the company;
Injury to public interest;
Nature of the default; and
Repetition of the default.

Section 446B- Lesser penalties for One Person Companies or small companies

Relief has been provided to OPC and Small Company in case of failure to comply with the provisions of sub-section (5) of section 92 (Annual Return), sub-section (2) of section 117 (Resolutions and agreements to be filed), sub-section (3) of section 137 (Copy of financial statement to be filed with Registrar).

In case of default, such company and officer in default of such company shall be punishable with fine or imprisonment or fine and imprisonment, as the case may be, which shall not be more than one-half of the fine or imprisonment or fine and imprisonment, as the case may be, of the minimum or maximum fine or imprisonment or fine and imprisonment, as the case may be, specified in such sections.

Section 447- Punishment for Fraud

Following two amendments have been made:

♠ Only person guilty of fraud involving an amount of at least ten lakh rupees or one percent of the turnover of the company, whichever is lower shall be punishable with imprisonment for a term which shall not be less than 6 months but which may extend to ten years and shall also be liable to a fine which shall not less than the amount involved in the fraud but which may extend to three times the amount involved in the fraud instead of any person guilty of fraud.

• Further, where the fraud involves an amount of less than ten lakh rupees or one percent of the turnover of the company, whichever is lower and does not involve public interest, any person guilty of such fraud shall be punishable with imprisonment for a term which may extend to five years or with fine which may extend to twenty lakh rupees or with both.

Section 458 Delegation by Central Government of its powers and functions

Consequent upon omission of sections 194(Forward dealings) and 195(Insider trading), the proviso to sub-section (1) of section 458 has been omitted.