Pursuant to the assent granted by Lok Sabha on July 27, 2017 to the Companies (Amendment) Bill, 2017, the same was put in forth to the Rajaya Sabha for its approval. Rajaya Sabha on December 19, 2017 approved the same without any modification. The Amendment Bill, 2017 received President’s assent on January 3, 2018 and is now regarded as the Companies (Amendment) Act, 2017 (“Amendment Act, 2017”) thereby making substantial changes in the Companies Act, 2013.

In accordance with the amendments proposed in Companies (Amendment) Act, 2017, companies are required to take care of the impacts of the same on the provisions of the Companies Act, 2013 (“Act, 2013”) while carrying out its operations in order to avoid non-compliance and penalties prescribed under the Act, 2013.

Some of the major actionables which need to be taken care of by the companies immediately on coming into the effect of the Companies Amendment Act, 2017 are listed below:

Matters to be ensured

Section Gist of Key Amendments vide Companies Amendment Act, 2017
Steps to be taken/ matters to be ensured  on the provisions coming  into effect
2 (6) Definition of associate company: Significant influence will be determined based on control of atleast 20% of total voting power instead of total share capital.
  • A Company which classified another company on account of the erstwhile definition that referred to control of at least 20% total share capital will be required to revisit and re-assess if it will be classified based on current definition.
  • Where, companies classified the investee entity as ‘associate’ on account of holding of convertible preference shares, the same shall be reversed and restructured accordingly.
  • Consequential impact on consolidation and related compliance.
2(30) Definition of Debenture: Instruments referred to in Chapter III-D of the Reserve Bank of India Act, 1934; and such other instrument, as may be prescribed by the Central Government in consultation with the Reserve Bank of India, issued by a company, shall not be treated as debenture;
  • The amendment provides abundant clarity, no specific action to be taken.
  • Provisions with respect to issuance and allotment of debentures or any other provisions dealing with debentures of Act, 2013 shall not be applied the given instruments viz. commercial papers, NCDs issued with maturity of up to 1 year etc. Therefore, Section 42 compliance is ruled out;
2 (46) Definition of holding company: Expression “company” will include body corporate.
  • The amendment provides abundant clarity;
  • The companies shall revisit the list of  related party in relation to holding company especially in such cases where the holding company is a body corporate;
  • Details of holding company is required to be mentioned in Annual Return filed by the company will be changed accordingly;
  • Ongoing transactions with holding company shall be ratified by Audit Committee and omnibus approval may be taken accordingly. Where the transactions mandate sanction of Board and Shareholders under Section 188, the same shall be obtained;
2 (51) Definition of key managerial personnel: Will include 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.
  • The Companies may consider designating any of the SMPs as KMP, as the definition permits the same.
  • Discretionary power on the board, however, Section 203 is independent.
  • There will no change in requirement under Section 203. Therefore, companies will have to have those 3 classes of KMPs;
  • Where new KMPs are designated by the Board, all other provisions relating to KMPs shall be fulfilled. Eg. such KMP will be a related party, his details shall be recorded in register under Section 170 etc.
2 (57) Definition of net-worth: shall include debit and credit balance in the profit and loss account. · Clarificatory in nature as the amendment was to remove the flaw in drafting.

  • However, it is to be noted that definition of free reserves has not been amended and therefore, there will be no change in computation of same.
  • Companies may re-compute the net-worth for the purpose of Sections 76, 92, 134, 135, 136 (1), 148 (2), 180 (1) (a), 188 where it is required to be computed to ascertain the eligibility, limits or simply for disclosure.


2(76) Definition of related party: An investing company or a venturer shall also become a related party as per the new list.

Explanation.—For the purpose of this clause, “the investing company or the venturer of a company” means a body corporate whose investment in the company would result in the company becoming an associate company of the body corporate.;


  • In case of unlisted companies and debt listed companies, the investing company and the venture were related party only for the purpose of accounting standards, mandating disclosure in financial statements.
  • Pursuant to said amendment in Act, 2013 the list of Related Parties, in case of unlisted companies and debt listed entities, shall be reviewed in the light of the amendment.
  • Ongoing transactions that the Company with investing company or venturer shall be ratified by Audit Committee and omnibus approval may be taken accordingly. Where the transactions mandate sanction of Board and Shareholders under Section 188, the same shall be obtained;
2(87) Definition of “subsidiary company” or “subsidiary”.  Previously, the company on which a company 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 shall be considered as holding. However, now the term total share capital has been substituted with words “total voting rights” in order to consider only equity share capital for the same.



  • The companies shall revisit the list of subsidiary companies;
  • Details of holding and subsidiary companies as required to be mentioned in Annual Return filed by the company will be changed accordingly;
  • Details in e-form AOC- 1 containing the details of subsidiaries, associates or joint ventures shall be changed accordingly;
  • While preparing consolidated financials or filing any information with any authority or institutions the same shall be considered.
  • Information posted on website with respect to subsidiaries, shall be changed accordingly;
  • Form CRL-1 to be filed by the company in e-form GNL-2, as per the revised list of subsidiaries.
2(91) Definition of “turnover“: to mean the gross amount of revenue recognized 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;

Previous definition provided for aggregate value of the realization of amount made from the sale, supply or distribution of goods or on account of services rendered.

  • Clarificatory in nature as the amendment was to remove the flaw in drafting.
  • Now its more likely a revenue based unlike earlier which seemed to be based on mere cash flow.
  • Companies may assess if any change in figure of ‘turnover’ will be resulted and accordingly, re-compute the turnover for the purpose of Sections 2 (85), 76, 92, 135, 136 (1), 138, XBRL filing, 148 (2), 149, 188, 203, 204 where it is required to be computed to ascertain the eligibility, limits or simply for disclosure.
21 Authentication of Documents: Documents and contracts can be authenticated by KMP or an officer or employee of the company duly authorized by Board.
  • The Board may consider authorizing employees for authentication of documents and contracts.
42 Process of private placement:
  • The group of persons whom the offer is to be made is to be identified by the Board. Ideally, where the authority is delegated, then by the delegated authority.
  • PP offer and application shall not carry right of renunciation.
  • Requirement to file Form GNL-2 gets discontinued;
  • Rules are yet to be amended to give effect to the aforesaid amendment i.e. non filing with Registrar and SEBI.
  • Companies cannot use funds till return of allotment has been filed with ROC within 15 days from the date of allotment. Separate penalty provided for default in filing of return of allotment.
  • Companies can simultaneously take up more than one issue of securities.
73 Acceptance of deposits

  • Changes in the provision of creating deposit repayment reserve account;
  • Removal of provision of deposit insurance;
  • The company, if defaulted in repayment of deposit or payment of interest thereon, will also be allowed to raise deposits, subject to the condition that it has repaid all the money & 5 years have elapsed since the date of making good the default.
A company (other than banks, NBFCs and such other company as CG may prescribe) accepting deposits shall:

  • Credit to deposit repayment reserve account by 30th April of every financial year., amount equivalent to 20% of the deposits maturing in the following  year, instead of 15%;


77 Registration of charges:

The Central Government in consultation with RBI may exempt charges to which section 77 shall not apply.

  • Once such charges are notified, company shall not file charges u/s 77 for such charges.
  • Will not impact charges already filed.
89 Declaration in respect of beneficial interest:

Definition of beneficial interest provided which is likely to include cases of pledge within its ambit.

  • The new definition of beneficial interest is likely to cover following within the meaning of beneficial interest:

> Creation of Pledge with voting rights;

> Execution of irrevocable power of attorney in favor of proxy;

> Transfer of voting rights;

> Transfer of right to dividend;

  • The scope of definition is very wide and in absence of grandfathering provision, existing arrangements will also get covered thereby requiring compliance of provisions i.e. declaration from the person holding beneficial interest and the registered owner and will result in filing with the Registrar in prescribed form.
90 Substitution of section 90 – Register of significant beneficial owners in a company

  • Requirement of a declaration to the company by a significant beneficial owner i.e. Every individual, who acting alone or together, or through one or more persons or trust, including a trust and persons resident outside India, holds beneficial interests, of not less than twenty-five per cent. or such other percentage as may be prescribed, in shares of a company or the right to exercise, or the actual exercising of significant influence or control as defined in clause (27) of section 2.


  • The Section requires the company to identify whether the company has SBO or SBOs;
  • The company shall be required to give notice to the concerned persons whom, it believes, to be significant beneficial owner or who has knowledge of such person and the person shall revert with the requisite information within 30 days of the notice. Failure to do the same will attract penalty.
  • Such SBO or SBOs will have to file declaration (s).
  • The company is required to maintain a register thereof; the same shall be open for inspection by members on payment of fee as prescribed.
  • The company is required to file a return of significant beneficial owners with the Registrar within the period prescribed and changes in the information too.
  • To be ensured in the Company itself and also in subsidiaries.
135 Corporate Social Responsibility

  • For determining applicability or requirement to constitute CSR Committee, net worth, turnover or net profit of immediately preceding financial year shall be considered.
  • If company is not required to appoint Independent Director then the CSR Committee shall be constituted of 2 or more directors.
  • Company shall check eligibility for constitution of CSR Committee and accordingly, determine whether CSR spending is required to be made or not.
149 Companies to have Board of Directors

  • Change in eligibility criteria for independent directors.
  • While the existing IDs must be fulfilling the said criteria, the board may ascertain other persons too based on the changed criteria and consider their candidature for future.
161 Appointment of additional director, alternate director and nominee director

  • No person holding directorship in the company in any capacity can stand for alternate directorship in the same company.
  • Further, the change relates to extending the appointment of director in casual vacancy to private companies. Director appointed by the Board in case of casual vacancy shall subsequently be approved by the members in the general meeting.
  • The company shall ensure that a person holding any directorship in the company shall not hold alternate directorship in the same company;
  • Appointment made by board for filling the casual vacancy shall be approved by members in a general meeting.
164 Disqualifications for appointment of director

  • New director appointed in the defaulted company shall not be held disqualified for 6 months from the date of his appointment
  • Companies may consider inducting new directors on the Board of companies disqualified under Section 164 (2) where it is expected to correct the default within 6 months. Otherwise, it will attract the Vacation of office as discussed below.
167 Vacation of office of director

  • The change deal with Section 167(1)(a)  vacation of office of a director, if he incurs any of the disqualifications referred to under section 164. Director who has attracted disqualification under Section 164(2) shall vacate the office of director in all the companies where he is a director accept in company which is in default.
  • Further, office of director shall not be vacated for below period under section 167(1)(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.

  • In case of new director inducted on the Board of a company which has defaulted under Section 164 (2), after the period of 6 months, if the default has not been corrected, will have to vacate office in other companies where he holds directorship.
  • In case of existing directors of the defaulting company,  they can complete the tenure in the existing company , however, the office of director shall get immediately vacated in all companies other than the company which has incurred default;


185 Loan to directors

  • Giving of loan, providing guarantee or security is prohibited only where the same is  given to any director of company, or of a company which is its holding company or any partner or relative of any such director; or any firm in which any such director or relative is a partner.
  • Loan may be provided, guarantee or security may be given in case of other entities where the director is interested by seeking sanction of shareholders by way of special resolution and the loans shall be utilized by the borrowing company for its principal business activities.


  • The Companies may ascertain and consider Giving of loan, providing guarantee or security in cases which are now permitted, by seeking sanction of shareholders by way of special resolution.
  • Company to ensure that borrowing entity utilizes the loan for principal business activities.
  • The requirement of related party to abstain from voting will not apply to a company in which ninety per cent. or more members, in number, are relatives of promoters or are related parties.
  • Companies, other than private and government companies that are exempt pursuant to MCA notification, taking sanction of shareholders under Section 188 read with Rule 15 of MBP Rules will take note of exemption.
197 Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits.

  • The changes replace the requirement of Central Government’s approval under section 197 with approval by shareholders.
  • Approval of shareholders by special resolution shall be obtained for giving remuneration in excess of limits provided in second proviso to section 197(1).
  • Approval of banks/public financial institutions/non-convertible debenture holders/secured creditors is required to be obtained in case of default before obtaining the approval of members in the general meeting.
  • If any director draws or receives, directly or indirectly, by way of remuneration any such sums in excess of the limit prescribed by this section or without approval required under this section, he shall refund such sums to the company, within two years or such lesser period as may be allowed by the company, and until such sum is refunded, hold it in trust for the company.
  • Further, other changes are clarificatory in nature, in light of the approval of the Central Government being done away with and disclosures required to be given by auditor in its report.
  • For payment of remuneration in excess of the limits prescribed, approval of shareholders by Special Resolution shall be obtained;
  • On and from the commencement of the Companies (Amendment) Act, 2017, any application made to the Central Government under the provisions of this section [as it stood before such commencement], which is pending with that Government shall abate, and the company shall, within one year of such commencement, obtain the approval in accordance with the provisions of this section, as so amended
  • In case the company has defaulted in payment of debt to banks, FIs, NCD holders and other secured creditors, it shall obtain prior approval of such creditors before obtaining approval of shareholders in general meeting;


198 Calculation of profits

  • For calculating net profit under this section the following shall not be deducted:

i) profits, by way of premium on shares or debentures of the company, which are issued or sold by the company unless the company is an investment company as referred to in clause (a) of the Explanation to section 186.

ii) any amount representing unrealized gains, notional gains or revaluation of assets

  • Further any brought forward losses of the years prior to the commencement of the Act, 2013 shall be deducted while calculating net profit u/s 198.
The company shall re-compute its net profit for determining the limit of managerial remuneration, applicability of CSR and calculation of dividend.
403 Fee for filing Etc.

  • Annual filing forms if filed beyond the period specified in those sections, it may be submitted, filed, registered or recorded, as the case may be, after expiry of the period so provided in those sections, on payment of such additional fee as may be prescribed, which shall not be less than one hundred rupees per day and different amounts may be prescribed for different classes of companies. Higher additional fee will be imposed in case of default on two or more occasions.
  • Forms, other than annual filing forms, if filed beyond the period specified in those sections, it may be submitted, filed, registered or recorded, as the case may be, after expiry of the period so provided in those sections, on payment of fees as may be prescribed.
  • It has been abundantly clarified that payment of additional fees will not condone the delay and that company and officers shall be liable for penalty or punishment for such failure or default.
  • Companies, that fail to file eForms within prescribed time, should condone the delay under Section 460 as payment of additional fees will not provide any protection against penalty or punishment for such failure or default.

(Article is compiled by Team Vinod Kothari & Company & they can be reached at [email protected])

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June 2021