In this write up, I am sharing the Highlights of the Companies Amendment Bill, 2017, Hope it will be fruitful for all of you.
The Companies (Amendment) Bill, 2017 is passed by Lok Sabha and Rajya Sabha on 27th July 2017 and 19th December, 2017 respectively. It shall come into force on getting the President’s assent.
Broadly Aimed At:-
Difficulties in implementation stringent compliances.
Promote growth with employment & ease of doing business.
Harmonisation with AS, SEBI, RBI Act and regulations involved.
Rectifying omissions and inconsistencies in the Act.
Section2(6)- Associate company in Section 2(6) to mean control of at least 20% of the voting power or control or participation in business decision under an agreement.
Section2(30)-The 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 Reserve Bank of India, issued by a company, shall not be treated as debenture.
Section2(51)-KMP includes -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
Section 2(57)- Net worth includes:- Securities premium account and debit or credit balance of profit and loss account
Section 2(85)-Small Company:- Small Company means a company having
Paid-up share capital of fifty lakh rupees or such higher amount as may be prescribed which shall not be more than ten crore rupees; and
Turnover of two crore rupees as per profit and loss account for the immediately preceding financial year or such higher amount as may be prescribed which shall not be more than one hundred crore rupees.
According to sec 4(5), the registrar may reserve the name for a period of 60 days from the date of application.
As per the revised provision, the registrar may reserve the name for a period of 20 days from the date of approval.
In case of change of name by existing company, registrar may reserve the name for sixty days from the date of approval.
The period of name reservation is proposed to be reduced to twenty days from sixty days. The specified period for name reservation would be taken from the date of approval and not from the date of application.
As per sec 12(4), the company shall give the notice of change of its registered office to the registrar within 15 days of the change.
The words "within fifteen days" replaced with words "within thirty days"
The time period for giving notice of change of situation of registered office is increased from 15 days to 30 days.
A new section 3A has been inserted which prescribes that if at any time the number of members of a company is reduced below the minimum prescribed and the company carries on business for more than six months while the number of members is so reduced, then every person who is a member of the company during that time, shall be severally liable for the payment of the whole debts of the company contracted during that time, and may be severally sued.
Sec 73(2)(d) deals with Deposit Insurance.
Considering the fact that none of the insurance companies are offering insurance products for covering company deposit default risks, the requirement to have deposit insurance is omitted.
Pursuant to sec 129(3), where a company has one or more subsidiary companies, then company shall prepare a consolidated financial statement of the company and of all the subsidiaries in the same form and manner as that of its own which shall also be laid before the annual general meeting of the company
As per revised sec 129(3), where a company has one or more subsidiary companies, then company shall prepare a consolidated financial statement of the company and of all the subsidiaries and associate companies in the same form and manner as that of its own which shall also be laid before the annual general meeting of the company.
The term “associate companies” is inserted in addition to the subsidiaries.
Listed companies also place on its website, separate audited accounts of its each subsidiary.
In respect of foreign subsidiary if audit of accounts is not prescribed as per law of the country, then unaudited accounts is to be placed before AGM & considered for consolidation.
Sec 134(1) (3)
The financial statement, including consolidated financial statement, if any, shall be signed by the Chief Executive Officer, if he is a director in the company, or the Chief Financial Officer and the company secretary of the company,
The amendment provides that the Chief Executive Officer shall sign the financial statements irrespective of the fact whether he is a Director or not because Chief Executive Officer is a Key Managerial Personnel, and is responsible for the overall management of the company
Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.’
Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during the Immediately Preceding Financial Year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.
Amendment to Section 135 of the Act allows composition of CSR committee with two or more directors in case the company is not required to appoint Independent Director under section 149(4).
Sec 139(1) deals with the matter relating to ratification of appointment of auditors by member at every general meeting.
Sec 92(3) provides that the extracts of annual return shall be the part of Board report.
As per the revised sec 92(3), Every company shall place a copy of the annual return on the website of the company, if any, and the web-link of such annual return shall be disclosed in the Board's report.
The requirement to file extract of Annual Return is omitted, because most of the information in the extract is also required to be specified in financial statement or is available on the website of the company leading to duplication of information being reported to the shareholders
Sec 100(1). Provides that the Board may call an extra ordinary general meeting.
New proviso inserted:- An extraordinary general meeting of the company, other than of the wholly owned subsidiary of a company incorporated outside India, shall be held at a place within India.”
The wholly owned subsidiary of a company incorporated outside India is now allowed to hold its extra ordinary general meeting outside India.
Sec 110(1) deals with the matters that can be transact only through postal ballots.
Provided that any item of business required to be transacted by means of postal ballot, may be transacted at a general meeting by a company which is required to provide the facility to members to vote by electronic means under section 108, in the manner provided in that section.
The items required to be passed mandatorily by postal ballot may now be transacted at a general meeting where the facility of electronic voting is provided by the company.
Sec 160(1) deals with the requirement of deposit of one lakh rupees with respect to nomination of directors.
As per the new proviso, requirement of deposit of amount shall not apply in case of appointment of an independent director or a director recommended by the Nomination and Remuneration Committee, if any, constituted under sub-section (1) of section 178 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.
Sec 93 provides that every listed company shall file a return in the prescribed form with the Registrar with respect to change in the number of shares held by promoters and top ten shareholders of such company, within fifteen days of such change.
Sec 173(2) deals with the participation of directors in board meeting through video conferencing.
New proviso inserted, where there is quorum in a meeting through physical presence of directors, any other director may participate through video conferencing or other audio visual means in such meeting.
The directors are allowed to participate on certain items which were restricted at Board meetings through video conferencing or other audio visual means if there is quorum through physical presence of directors.
Every individual intending to be appointed as director of a company shall make an application for allotment of Director Identification Number to the Central Government in such form and manner and along with such fees as may be prescribed
The Central Government is now empowered to recognise any other universally accepted identification number as an identification document similar to director identification number.
Other Major Provisions:-
Section 89- The term beneficial interest in shares, includes the rights attached to shares or other distributions relating to shares.
Section 89(6)- In revised sec 89(6), the words “within the time specified under section 403” has been Omitted.
Section185-The companies are permitted to give loans to entities in which directors are interested after passing special resolution and adhering to disclosure requirements
The prohibition is proposed to be made applicable for assistance to director or his partner or relative or a firm in which such director or relative is a partner or to holding company of the company. The conditional assistance is possible to any person, Company has to pass a special resolution & explanatory statement to the notice should disclose all the facts & particulars. If the borrower is a Company then loan should be utilized for its principal business activity
The exempted categories are loan to MD/ WTD as a part of service condition or scheme and loans by companies in their ordinary course of business by charging interest as per tenure and loan, guarantee or security by holding company to its WOS and guarantee or security by holding company to its subsidiary company with a condition to use it for its principal activity.
Section 90- “Significant beneficial owner” includes every individual (resident or non-resident), or trust, acting alone or together, holds beneficial interests, of not less than twenty-five per cent or such percentage as may be prescribed in shares of a company or the right to exercise, or the actual exercising of significant influence or control under clause (27) of section 2 over the company. Significant beneficial owner give a declaration to the company about influence and his nature of interest. Company can enquire into the significant beneficial ownership by giving notice to individual. In case of non-compliances a tribunal can pass the order of attachment of rights to such shares.
Section130- After the words "regulatory body or authorities concerned", the words "or any other person concerned inserted.
Section130(3)-No order shall be made under sub-section (1) in respect of re-opening of books of account relating to a period earlier than eight financial years immediately preceding the current financial year
Section197(1)-Central Government approval for Managerial Remuneration, replaced by approval through special resolution by shareholders in general meeting, no CG approval required for public companies for payment of remuneration to managing director even exceeding 11% of net profits, approval of the central government would be needed only for variance to the conditions specified in part I of Schedule V for the appointment of MD/ WTD
Section 403- Delayed filing fee of AR & FS -100 Rs per day after the expiry of prescribed period.
As per revised sec 447:- Frauds involving an amount less than Rs.10 lakhs or one percent of the turnover of the company, whichever is less and does not involve public interest, shall be punishable with imprisonment or fine or both. Frauds below the limits, which do not involve public interest, may be given a differential treatment and compoundable since the cost of prosecution may exceed the quantum involved. Provided further that where the fraud involves an amount less than ten lakh rupees or one per cent. 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.
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