With a constant attempt to make the law simpler for entrepreneurs and promote & support new and existing business, the Government has bought in substantial changes through the Companies (Amendment) Act, 2015, which got the Presidential Assent on the 25th of May, 2015. This reflects the Government’s willingness to boost and promote the startup ecosystem. The Companies (Amendment) Act, 2015 is a key initiative by the Ministry of Corporate Affairs (MCA) towards ease of doing business in India.
1. No Requirement for minimum paid up capital
Earlier, a Private Limited Company was required to have a minimum paid up capital of Rs. 1 lacs. The Companies Amendment Act, 2015 dispenses this requirement.
Now, a Private Limited Company can be started with any amount of capital, even below Rs. 1 lacs. There is no minimum stipulation anymore.
Similarly, the requirement of minimum paid up capital of Rs. 5 lakhs for a Public Limited Company has also been removed.
With this, ease of starting a business has been increased.
2. No Requirement for Commencement of Business Certificate
The Companies Act, 2013 introduced the concept of Commencement of Business Certificate for Private Limited Company. The Commencement of Business Certificate was to be obtained after incorporation and before commencing business by filing a declaration with the Registrar. The declaration for Commencement of Business Certificate stated that every subscriber to the MOA has paid the value of the shares agreed to be taken by him and the paid-up share capital of the company is not less than five lakh rupees in case of a public company and not less than one lakh rupees in case of a private company.
The requirement of obtaining Commencement of Business Certificate post incorporation has been removed in the Companies Amendment Act, 2015.
A Private Limited Company can commence its business and exercise borrowing powers immediately on obtaining Certificate of Incorporation.
3. Use of Common Seal now optional
Earlier, Companies Act mandated use of common seal for various authorizations and attestations. The Companies Amendment Act, 2015 has made use of common seal optional, if authorization is done by two directors or by a director and the Company Secretary, if any.
4. Confidentiality of Board Resolutions
Board Resolutions contain all the information pertaining to the discussions and decisions of the Board. Till now, all the Board Resolutions passed by the Company and filed with the Registrar were easily accessible to the public. The same could be downloaded from the MCA site by paying a nominal fee. As per the amendment, no person can obtain such copies of Board Resolutions passed by a Company.
This will help companies maintain confidentiality of its course of action.
5. No requirement of Special Resolution for Related Party Transactions
Earlier, Companies with paid up capital above a specified limit were required to get shareholders’ approval through a “special resolution” (ie, approval from minimum 75% of shareholders) in case of transactions with related parties such as directors, key managerial personnel, a firm or company in which the director is a partner or director etc.
With the Companies Amendment Act, 2015, only an “ordinary resolution” (ie, approval from more than 50% of shareholders) of the shareholders would be sufficient for approving such transactions.
6. No resolution for transactions between Holding-Subsidiary Companies
Related party transactions between holding and wholly owned subsidiaries have been exempted from the requirement of taking approval by passing resolution at the general meeting.
We can expect more such amendments in the Company law so as to promote the goal of the government towards ease of doing business in India.
(The author is the founder of VenturEasy.com, an online portal for company formation, business registration, compliance and accounting services. She can be reached at firstname.lastname@example.org)