The Companies (Amendment) Bill, 2016 has been passed by the Lok Sabha on July 27, 2017 as Companies (Amendment) Bill, 2017 & would be referred to Rajya Sabha for consideration and passing.

There are 54, total Amendment made in Companies (Amendment) Bill, 2017. Circulated 43 amendment proposals out of which five new clauses also have to be incorporated –Clauses 47A, 73A, 75A, 78A and a New Provision Clause 88. Out of these 43 amendments, five new clauses have to be incorporated. This Bill had been referred to the Standing Committee. The Standing Committee had a detailed scrutiny of almost all the provisions. But, unfortunately, these five clauses have not been scrutinized by the Parliamentary Standing Committee.

“The report of the Standing Committees shall have persuasive value and shall be treated as considered advice given by the Committees.”

In this case, the Standing Committee had a detailed scrutiny and the Company Law Committee has given the recommendations. All these five amendments come out of all these things. It is not proper –Rule 80 (i) by virtue of Rule 388 because the Standing Committee has not considered these five new clauses.

Companies Act, 2013 was really a revolutionary and significant legislation which we had in the history of company laws. In the present scenario, this kind of a legislation is having its relevance. We all know
that India is becoming an international destination of investment. It is our duty to remove all the hardships and ambiguity in the way of implementing various causes of the Companies Act.

Similarly, corporate governance is also coming in a big way in India. We should give more attention and emphasis there also. As regards amendment in the CSR, it was a progressive legislation which we had in the Companies Act. We must concentrate and pay more attention there also. As far as this Bill is concerned, it made the companies more accountable in relation to structuring, disclosure and compliance requirements. In that way, it is the most welcome step.

The Companies Act, 2013 limits the number of intermediary companies through which investment can be made. Similarly, it also limits the number of layers of subsidiaries in a company to have this kind of an investment. This amendment makes it mandatory that the technical member must at least be at the level of an Additional Secretary. It is true that this legislation is intending to address the difficulties faced by the stakeholders and improve ease of doing business in our country.

In a way, these proposals are giving clarification and removing ambiguity. This legislation is a most welcome step. There are two points and need to be discussed in detail considering the time frame.

Sr. No. Particulars
1 ROLE OF INDEPENDENT DIRECTORS
2 CORPORATE SOCIAL RESPONSIBILITY

ROLE OF INDEPENDENT DIRECTORS

The first point is regarding the role of independent directors as per the Companies Act. It is also a most welcome amendment. As per the Act, 2013, the role of independent director was well-explained. It was brought with a very good intention. It helps the companies to protect the interest of minority shareholders and ensure that the Board does not favor any particular stakeholder. The role of the independent directors is very relevant. It ensures clean governance among the corporates. In that way, it was a very important piece of amendment in the Companies Act. There are certain essential qualifications for independent directors.

What are those qualifications ?

  • He should not be a promoter of the company.
  • He should not have any kind of special interest in the economic affairs of the company.
  • He should not have any kind of financial relationship with the company. None of his relatives has any kind of financial interest in the company.
  • He is having completely independent nature of assignment as an independent director.

As far as this piece of legislation is concerned, whether the independence of the independent directors is diluted or not. whether the independence of the independent directors will be encroached upon through this amendment. That is one thing.

CORPORATE SOCIAL RESPONSIBILITY

At the end, CSR, by the introduction of CSR, India may, perhaps, be a model to the entire world. CSR was a very progressive and revolutionary measure which we had taken. Unfortunately, CSR policy was not implemented properly. Some industrial heads are diluting it. In the proposed amendments, there is a provision for that. We are giving exemption to certain categories. Any kind of dilution of CSR activities should not be there. CSR should be adhered to properly.

“That the Bill further to amend the Companies Act, 2013, be taken into consideration.”

CLAUSE-BY-CLAUSE CONSIDERATION OF THE BILL

Clause 2

Amendments made:

Page 2, after line 32, insert—

‘(ixA) in clause (72), in the proviso, in clause (A), after the words “State Act”, the words “other than this Act or the previous company law” shall be inserted;’. (3)

Page 2, line 39, for “a company”, substitute “the company”.

(4)

Page 2, after line 39, insert–

‘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.’. (5)

Page 3, for lines 3 to 7, substitute–

‘(xii) in clause (87), in sub-clause (ii), for the words ”total share capital”, the words “total voting power” shall be substituted.’.
(6)

There are Amendment Nos. 50 and 51 given.

“Page 1, line 17,–

omit “the arrangement have”. (50)

“Page 2, line 11,–

for “in consultation with”

substitute “with the approval of.”(51)

Amendment Nos. 50 and 51 to Clause 2, that is, ‘in consultation with’ the Central Government, would like to have the amendment with the approval of the Central Government in respect of instruments, which are to be signed by the concerned people.

Amendment Nos. 50 and 51 to Clause 2,

“That clause 2, as amended, stand part of the Bill.”

Clause 2, as amended, was added to the Bill.

Clause 3 was added to the Bill.

—-

Clause 4

Amendment made:

Page 3, for lines 22 to 46, substitute—

‘4. In section 4 of the principal Act, in sub-section (5), for clause (i), the following shall be substituted, namely: –

“(i) Upon receipt of an application under sub-section (4), the Registrar may, on the basis of information and documents furnished along with the application, reserve the name for a period of twenty days from the date of approval or such other period as may be prescribed:

Provided that 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.”.’. (7)

Amendment Nos. 52 and 53 to Clause 4.

Query or clarification made regarding the Object Clause in the Memorandum of Association. This should be specific and lawful, so that, it added the term ‘lawful’ also.

“Page 3, line 28, —

after “specific”

insert “lawful”. (52)

“Page 3, lines 35 and 36, —

for “such other period as may be prescribed”

substitute “forty – five days from the date of the application.”(53)

Amendment Nos. 52 and 53 to Clause 4,

“That clause 4, as amended, stand part of the Bill.”

Clause 4, as amended, was added to the Bill.

Clauses 5 and 6 were added to the Bill.

Clause 7

“Page 4, line 7, –

for “employee”

substitute “director”. ”(54)

This is a very important amendment to Section 26 of the Act, that is, an instrument has to be attested by any employee.

Amendment is, instead of employee, let it be the director of the company. It is a material amendment that is to be incorporated.

Amendment No. 54 to clause 7.

“That clause 7 stand part of the Bill.”

Clause 7 was added to the Bill.

Clause 8

Amendment made:

Page 4, for line 18, substitute

“(ii) clauses (a), (b) and (d) shall be omitted.”. (8)

“That clause 8, as amended, stand part of the Bill.”

Clause 8, as amended, was added to the Bill.

Clauses 9 to16 were added to the Bill.

Clause 17

Amendment made:

Page 7, for lines 5 to 7, substitute

`17. In section 76A of the principal Act, –

(a) in clause (a), for the words, “one crore rupees”, the words “one crore rupees or twice the amount of deposit accepted by the company, whichever is lower”shall be substituted;

(b) in clause (b), –

(i) for the words, “seven years or with fine”, the words “seven years and with fine”shall be substituted;

(ii) the words “or with both”shall be omitted.’. (9)

“That clause 17, as amended, stand part of the Bill.”

Clause 17, as amended, was added to the Bill.

Clauses 18 to 20 were added to the Bill.

Clause 17

Amendment made:

Page 7, for lines 23 and 24, substitute

`21. In section 89 of the principal Act, –

(i) in sub-section (6), the words and figures, “within the time specified under section 403”, shall be omitted;

(ii) in sub-section (7), for the words and figures, “under the first proviso to sub-section (1) of section 403”, the word “therein’, shall be substituted;

(iii) after sub-section (9), the following sub-section shall be inserted, namely: -’. (10)

“That clause 21, as amended, stand part of the Bill.”

Clause 21, as amended, was added to the Bill. Clause 22 was added to the Bill.

Clause 23

Amendments made:

Page 9, lines 9 and 10, for “One Person Company and small company”, substitute “One Person Company, small company and such other class or classes of companies as may be prescribed.”.
(11)

Page 9, after line 14 insert

(iii) in sub-section (4), the words and figures, “within the time as specified, under section 403”, shall be omitted;

(iv) in sub-section (5), for the words and figures, “under the section 403 with additional fees”, the word “therein’, shall be substituted.’. (12)

“That clause 23, as amended, stand part of the Bill.”

Clause 23, as amended, was added to the Bill.

Clauses 24 to 27 were added to the Bill.

Clause 28

Amendment made:

Page 9, lines 42 and 43, for “not less than ninty- five per cent.”, substitute “majority in number of members entitled to vote and who represent not less than ninety-five per cent.”. (13)

“That clause 28, as amended, stand part of the Bill.”

Clause 28, as amended, was added to the Bill.

Clause 29 was added to the Bill.

Clause 30

Amendment made:

Page 10, after line 11, insert

‘(i) in sub-section (1), the words and figures “within the time specified under section 403”shall be omitted;’. (14)

Page 10, for line 12, substitute

‘(ii) in sub-section (2), —

(a) for the words and figures “under section 403 with additional fees”, the word “therein”shall be substituted;’. (15)

Page 10, line 13 for “(a)”, substitute “(b)”. (16)

Page 10, line 15 for “(b)”, substitute “(c)”. (17)

Page 10, line 17 for “(ii)”, substitute “(iii)”. (18)

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“That clause 30, as amended, stand part of the Bill.”

Clause 30, as amended, was added to the Bill.

New Clause 30A

Amendment made:

Page 10, after lines 25, insert

Amendment of section 121.

‘30A. In section 121 of the principal Act, –

(i) in sub-section (2), the words and figures “within the time specified, under section 403” shall be omitted;

(ii) in sub-section (3), for the words and figures “under section 403 with additional fees”, the word “therein” shall be substituted.;’. (19)

“That new clause 30A be added to the Bill”.

New clause 30A was added to the Bill.

Clause 31

Amendment made:

Page10, for lines 26 and 27, substitute

’31. In section 123 of the principal Act, –

(a) in sub-section (1), –

(i) in clause (a), –

(A) for the words “both; or”, the word “both:” shall be substituted;

(B) the following proviso shall be inserted, namely: –

“Provided that in computing profits any amount representing unrealized gains, notional gains or revaluation of assets and any change in carrying amount of an asset or of a liability on measurement of the asset or the liability at fair value shall be excluded; or”;

(ii) in the second proviso, for the words “transferred by the company to the reserves”, the words “transferred by the company to the free reserves” shall be substituted;

(b) for sub-section (3), the following sub-section shall be substituted, namely:-‘. (20)

“That clause 31, as amended, stand part of the Bill”.

Clause 31 as amended was added to the Bill.

Clause 32

Amendment made:

Page 10, line 50, after “subsidiary or subsidiaries”, insert “and associate company or companies”. (21)

“That clause 32 stand part of the Bill”.

Clause 32 as amended was added to the Bill.

Clause 33 was added to the Bill.

Clause 34

Amendment made:

Page 11, for lines 15 to 17, substitute

’34. In section 132 of the principal Act,

(i) in sub-section (4), in clause (c), in sub-clause (A), in item

(II), for the words “ten lakh rupees”, the words “five lakh rupees” shall be substituted;

(ii) in sub-section (5), for the words, brackets and figure “the Appellate Authority constituted under sub-section (6) in such manner as may be prescribed”, the words “the Appellate Tribunal in such manner and on payment of such fee as may be prescribed” shall be substituted;

(iii) sub-sections (6), (7), (8) and (9) shall be omitted.’. (22)

“That clause 34, as amended, stand part of the Bill”.

Clause 34, as amended, was added to the Bill.

Clauses 35 and 36 were added to the Bill.

Clause 37

Amendment made:

Page 12, lines 25 and 26, for “agreed by ninety-five per cent. of the members entitled to vote at the meeting”, substitute-“agreed by members-

(a) holding if the company has a share capital, majority in number entitled to vote and who represent not less than ninety- five per cent of such part of the paid-up share capital of the company as gives a right to vote at the meeting; or

(b) having, if the company has no share capital, not less than ninety-five per cent of the total voting power exercisable at the meeting.”. (23)

“That clause 37, as amended, stand part of the Bill”.

Clause 37, as amended, was added to the Bill.

Clause 38

Amendment made:

Page 13, for lines 6 and 7, substitute

’38. in section 137 of the principal Act, –

(i) in sub-section (1), –

(a) the words and figures “within the time specified under section 403” shall be omitted;

(b) in the second proviso, the words and figures “within the time specified under section 403” shall be omitted;

(c) after the fourth proviso, the following proviso shall be inserted, namely: -. (24)

Page 13, line 12, omit “listed”. (25)

Page 13, after line 15, insert

‘(ii) in sub-section (2), the words and figures “within the time specified, under section 403” shall be omitted;

(iii) in sub-section (3), for the words and figures “in section 403”, the word “therein” shall be substituted.’. (26)

“That clause 38, as amended, stand part of the Bill”.

Clause 38, as amended, was added to the Bill.

Clauses 39 and 40 were added to the Bill.

Clause 41

Amendment made:

Page 13, for lines 21 to 27, insert

“41. In section 141 of the principal Act, in sub-section (3), for clause (i) the following clause shall be substituted, namely: -“. (27)

“That clause 41, as amended, stand part of the Bill.”

Clause 41, as amended, was added to the Bill.

Clauses 42 to 47 were added to the Bill.

New Clause 47A

Amendment made:

Page 15, after line 21, insert-

Amendment of section 157

’47 A. In section 157 of the principal Act, –

(i) in sub-section (1), the words and figures, “within the time specified under section 403” shall be omitted;

(ii) in sub-section (2), the words and figures, “before the expiry of the period specified under section 403 with additional fee”, shall be omitted.’. (28)

“That new clause 47A be added to the Bill.”

New clause 47A was added to the Bill.

Clause 48

Amendment made:

Page 15, line 27, after “178”, insert, “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.”. (29)

“That clause 48, as amended, stand part of the Bill.”

Clause 48, as amended, was added to the Bill.

Clauses 49 to 58 were added to the Bill.

Clause 59

Amendment made:

Page 18, for lines 29 to 36, substitute

“(4) If any loan is advanced or a guarantee or security is given or provided or utilized in contravention of the provisions of this section, –

(i) the company shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees;

(ii) every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees; and

(iii) the director or the other person to whom any loan is advanced or guarantee or security is given or provided in connection with any loan taken by him or the other person, shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees, or with both.”. (30)

“That clause 59, as amended, stand part of the Bill.”

Clause 59, as amended, was added to the Bill.

Clause 60

Amendment made:

Page 18, omit line 38. (31)

Page 19, line 10, after “section”, insert, “, except sub-section (1),”. (32)

“That clause 60, as amended, stand part of the Bill.”

Clause 60, as amended, was added to the Bill.

Clauses 61 to 63 were added to the Bill.

Clause 64

Amendment made:

Page 19, for lines 43 and 44, substitute

‘64. In Section 196 of the principal Act, –

(a) in sub-section (3), in clause (a), after the proviso, the following proviso shall be inserted, namely: –

“Provided further that where no such special resolution is passed but votes cast in favor of the motion exceed the votes, if any, cast against the motion and the Central Government is satisfied, on an application made by the Board, that such appointment is most beneficial to the company, the appointment of the person who has attained the age of seventy years may be made.”;

(b) in sub-section (4), for the words “specified in that Schedule”, the words “specified in Part I of that Schedule”shall be substituted.’(33)

“That Clause 64, as amended, stand part of the Bill.”

Clause 64, as amended, was added to the Bill.

Clause 65

Amendments made:

Page 20, for line 5 to 7, substitute

“Provided also, that where the company has defaulted in payment of dues to any bank or public financial institution or non-convertible debenture holders or any other secured creditor,”. (34)

Page 20, line 18, for “of”, substitute “or”. (35)

Page 20, for lines 25 to 27, substitute

“Provided that where the company has defaulted in payment of dues to any bank or public financial institution or non-convertible debenture holders or any other secured creditor, the”. (36)

“That Clause 65, as amended, stand part of the Bill.”

Clause 65, as amended, was added to the Bill.

Clause 66

Amendments made:

Page 20, for line 47 to 49, substitute– ‘(i) in sub-section (3)-

(a) in clause (a), after the words “sold by the company”, the words and figures “unless the company is an investment company as referred to in clause (a) of the Explanation to section 186”shall be inserted:

(b) after clause (e), the following clause shall be inserted, namely: –

“(f) any amount representing unrealized gains, notional gains or revaluation of assets.”(37)

“That Clause 66, as amended, stand part of the Bill.”

Clause 66, as amended, was added to the Bill.

Clauses 67 to 73 were added to the Bill.

New Clause 73A

Amendment made:

Amendment of section 374 ‘73A. In section 374 of the principal Act, after clause (d), the following proviso shall be inserted, namely:-

“Provided that upon registration as a company under this Part a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 shall be deemed to have been dissolved under that Act without any further or deed.”.’.

(38)

“That new clause 73A be added to the Bill.”

New clause 73A was added to the Bill.

Clauses 74 and 75 were added to the Bill.

New Clause 75A

Amendment made:

Page 21, after line 41, insert
Amendment of section 391 ‘75A. In section 391 of the principal Act, for sub- section (2), the following sub-section shall be substituted, namely:-

“(2) Subject to the provisions of section 376, the provisions of Chapter XX shall apply mutatis mutandis for closure of the place of business of a foreign company in India as if it were company incorporated in India in case such foreign company has raised monies through offer or issue of securities under this Chapter which have not been repaid or redeemed.”.’. (39)

“That new clause 75A be added to the Bill.”

New clause 75A was added to the Bill.

Clause 76

Amendments made:

(40)

Page 22, omit lines 1 to 20. (41)

“That clause 76, as amended, stand part of the Bill.”

Clause 76, as amended, was added to the Bill.

Clauses 77 and 78 were added to the Bill.

 New Clause 78A

Amendment made:

Page 22, after line 51, insert

Amendment of section 410.

‘78A. In section 410 of the principal Act, for the words, “orders of the Tribunal”, the words,

“orders of the Tribunal or of the National Financial Reporting Authority”shall be substituted.’. (42)

“That new clause 78A be added to the Bill.”

New Clause 78A was added to the Bill.

Clauses 79 to 87 were added to the Bill.

New Clause 88

Amendment made:

Page 24, after line 22, insert

Amendment of Section 458

“88. In section 458 of the principal Act, in sub-section (1), the proviso shall be omitted.”. (43)

“That new clause 88 be added to the Bill.”

New clause 88 was added to the Bill.

Clause 1

Amendment made: 

Page 1, line 3, for “2016”, substitute “2017”. (2)

“That clause 1, as amended, stand part of the Bill.”

Clause 1, as amended, was added to the Bill.

Enacting Formula

Amendment made: 

Page 1, line 1, for “Sixty-seventh”, substitute “Sixty-eighth”. (1)

“That the Enacting Formula, as amended, stand part of the Bill.”

The Enacting Formula, as amended, was added to the Bill. The Title was added to the Bill. —-

“That the Bill, as amended, be passed.”

DISCLAIMER : The details of this article have been prepared on the basis of relevant provisions. This is written only for knowledge sharing purpose and author does not have any responsibility.

(Compiled by CS Meetesh Shiroya , who can be reached at meetesh.shiroya@gmail.com)

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Tags : Companies Act (1902) Companies Act 2013 (1674)

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