The Companies Amendment (Bill) 2017:- Both Lok Sabha (27 July 2017) and Rajya Sabha (19th Dec. 2017) given their consent and passed this Amendment Bill.
Companies Amendment (Bill) 2017 was passed after incorporating certain notable amendments. The major amendments include definitions and clarification of certain terms in Section 2. Omission of provisions relating to Time limit 0f 270 days for certain filings, forward dealing and insider trading, doing away with the requirement of approval of the Central Government for managerial remuneration above prescribed limits under Schedule V, providing for maintenance of register of significant beneficial owners and filing of returns in this regard to the ROC and removal of requirement for annual ratification of appointment or continuance of auditor and so on. Have a look on the amendments:-
1. Section 4 – Memorandum – Name reservation up to 20 days in place of 60 days for new company. But for existing company it will be up to 60 days.
2. Section 7- Incorporation of Company- Requirement of Affidavit from Subscriber has been discontinued, Only Declaration from subscriber will work.
3. Section 12- Registered Office of the Company – Time limit of 15 days got replaced by 30 days for having registered office and intimation regarding change of registered office.
4. Section 21- Authentication of Documents- Apart from KMP any employee so authorized can authenticate documents on behalf of the company.
5. Section 26 – Matters to be stated in Prospectus- Prospectus shall state such information and financial information as specified by the SEBI in consultation with Central Govt.
6. Section 35- Civil Liability for Misstatement in Prospectus – To relieve Promoter and Director if they relied on expert, who is competent and given his consent and not withdrawn and has reasonable ground to believe.
7. Section 42- Private Placement – Important to note the time limit for allotment i.e. 15 days instead of 30 days. There is no right of renunciation; further money received would not be used until allotment filed with ROC.
8. Section 53- Prohibition on issue of shares at Discount- The companies can issue shares at DISCOUNT to its creditors against its debt under debt restructuring scheme in accordance with guidelines of RBI.
9. Section 54- Issue of Sweat Equity Shares – Now the bar of one year post registration has been removed. It can be issued at any time post registration of the company.
10. Section 62- Further Issue of Shares- Now the provisions u/s 42 in respect of preferential offer has been brought in section itself there is no separate rules.
11. Section 73- Prohibition on acceptance of deposits from public- In place of 15%, now 20% of the amount of deposits, maturing during the following financial year will be deposited on or before the 30th day of April each year in a separate bank account as repayment reserve account. Defaulters made good can accept deposit post 5 yrs.
12. Section 74- Repayment of Deposits accepted before commencement of – Time limit for unpaid deposit, part thereof and interest repayment within 1 yr. got extended up to 3 yrs.
13. Section 77- Duty to register charges – It shall not apply to certain charges, as may be prescribed by the Central Government in consultation with the Reserve Bank of India.
14. Section 78- Application for Registration of charge- The Charge holder can file the charge on the expiry of 30 days from the creation of charge where a company fails to file so, in place of 300 days.
15. Section 82- Company to report satisfaction of charge- Time limit of filing got extended up to 300 days with payment of additional fees.
16. Section 89- Declaration in respect of beneficial interest in any share- There is no time limit now, ‘earlier it was 270 days’ for filing with additional fees.
17. Section 90- Investigation of beneficial ownership of shares in certain cases- Who directly or indirectly with association or .. holds beneficial interests, of not less than twenty-five per cent of voting right, control, and shares as prescribed. This section has been re framed.
18. Section 92- Annual Return-Omitted MGT- 9 requirements only link of website is good. Omitted disclosing indebtedness and details. There is no time limit now, ‘earlier it was 270 days’ for filing with additional fees.
19. Section 93- Return to be filed with Registrar in case Promoters’ stake changes- Now return is not required filing for change in stake of promoters and top 10 shareholders.
20. Section 96- Annual General Meeting-‘AGM’ of unlisted company may be held at anyplace in India if consent is given is writing or by electronic mode by all the members in advance.
21. Section 100- Calling of Extraordinary General Meeting- EGM of wholly owned subsidiary of a company incorporated outside India can be held outside India otherwise in India only.
22.Section 101- Notice of meeting- Meeting with shorter notice AGM in writing or electronic mode by 95% in other general meetings by eligible majority representing 95% share capital or total voting power for that resolution.
23. Section 110- Postal Ballot- To allow companies which are mandatorily required to provide electronic voting facility, to transact items in general.
24. Section 117- Resolutions and Agreements to be filed AND Section 121- Report on annual general meeting-“Time limit of 270 days” within which resolutions and agreements, Report on AGM could be filed on payment of additional fee has been done away with.
25. Section 129- Financial Statement- 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. Additional separate statement for subsidiary or associate.
26. Section 134- Financial Statement, Board’s report- CEO will sign the report, whether Director or not. Disclosures in financial statement are not required to reproduce. Extract of annual return link is only to mention. In place of polices again web link is to mention where it has been displayed on web. Omitted the responsibility of Board for carrying performance evaluation.
27. Section 135- Corporate Social Responsibility- Expenditure towards CSR will be calculated based on immediately preceding financial year instead of preceding 3 yrs. Two or more directors to constitute committee.
28. Section 137- Copy of Financial Statement to be filed with Registrar- It has been allowed 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.
29. Section 139- Appointment of Auditors- Omitted the requirement related to ratification of appointment of auditors by members at every annual general meeting.
30. Section 141- Eligibility, Qualification and Disqualifications of Auditors- 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.
31. Section 143- Powers and duties of auditors and auditing standards- It cover associate companies along with subsidiary companies with respect to right of auditors to have access to accounts and records. The auditor’s report will include whether internal financial controls with reference to financial statement are in place, not in respect of system.
32. Section 180- Restrictions on powers of board- it will include securities premium along with paid-up share capital and free reserves for calculation of maximum limits on borrowing powers of the Board.
33. Section 185- Loan to directors- Amended or replaced with new provisions. Please read with full context.
34. Section 186- Loan and investment by company- Employee excluded, shareholder’s approval would not be required in case of WOS or Joint Venture Company etc.
35. Section 188- Related Party Transactions-the requirement related to restriction on voting by relatives 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.
36. Section 194 & 195- Prohibition on Forward dealings in securities of company by director or Key Managerial Personnel, prohibition on Insider Trading– Omitted.
37. Section 196- Appointment of Managing Director, Whole time director or Manager- Special resolution not required for appointing a person with age of more than 70 only majority votes is good enough. CG approval will only be required in case appointment is not as per Part I of Schedule V.
38. Section 197- Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits- CG approval not required at the time of payment of remuneration more than 11% of net profits. Approval of shareholders through Special resolution, approval of FI in case of default, for paying remuneration more than the individual limits, earlier Ordinary resolution was required only. IN case of loss or inadequacy remuneration in accordance with schedule V only, no CG approval any more.
39. Section 366- Companies capable of being registered- Allowed conversions of partnership firms, LLP, etc. with two or more partners into private companies. Currently they must have seven partners.
There are several other major and minor amendments like Section 198- Calculation of profits, Section 201- Forms of, and procedure in relation to, certain applications, Section 216- Investigation of ownership of company, Section 247- Valuation by Registered Valuers, Section 379- Application of Act to foreign companies, Section 435- Establishment of Special Courts, Section 403- Fee for Filings, etc.
DISCLAIMER: The information given in this Note has been made on the basis of the provisions stated in the Companies (Amendment) Bill, 2017 and Companies Act, 2013. It is based on the analysis of the facts and our understanding and interpretation of applicable laws as on date. We expressly disclaim any financial or other responsibility arising due to any action taken by any person on the basis of this note.