Highlights
of Companies (Amendment) Bill, 2017 passed by Rajya Sabha
The Companies (Amendment) Bill 2017 (the Bill) was
passed by the Lok Sabha on 27th July, 2017. The bill was placed in
Rajya Sabha on15th December, 2017 and was passed on 19th
December, 2017.
The Bill amends the Companies Act, 2013 in relation
to structuring, disclosure and compliance requirements for companies. The major
changes include simplification of the private placement process;
rationalization of provisions related to loans to directors; replacing the
requirement of approval of the central government for managerial remuneration
above prescribed limits by approval through special resolution of shareholders;
aligning disclosure requirements in the prospectus with the regulations made by
SEBI.
The Bill
proposes ease of doing business whereas on flipside the bill intends to
strengthen corporate governance standards, initiate strict action against
defaulting companies and making some offence as non-compoundable.
Chapter 1: Preliminary
1. Associate
Company: The meaning of significant influence is changed from 20 % or
more of total share capital to 20% or more of voting power.
2. Financial
Year: Company can now change its financial year to align with associate
company incorporated outside India
3. Holding
Company: The definition of holding company widened to include LLP incorporated in India and Company/LLP incorporated outside India will be treated as holding
company
4. Related Party
Transactions:
Scope is widened to include Body Corporate
5. Subsidiary
Company:
One of the conditions to become a subsidiary company is changed. The Company
which exercises control over other company is now more than one half of voting
power whereas earlier it was more than one half of total share capital.
6. Turnover: The turnover
amount as recognized in Profit and loss account is to be considered rather than
realisation amount
Chapter 2:
Incorporation of Company and Matters Incidental thereto
1. Name Reservation /
Approval: In case of Incorporation, if the name is
approved, the company is to be incorporated within 20 days from the date of
approval. After 20 days, the name shall stand lapsed.
2. Registered Office: A company
shall within 30 days of its incorporation (earlier 15 days of its
incorporation) have a registered office.
Notice of every change of the situation of the registered office shall
be given to RoC within 30 days (earlier 15 days) of the change
Chapter 3: Private
Placement
1. The
private placement offer letter and application form shall not carry any right
of renunciation.
2. The company is not to utilise the money raised through
private placement unless allotment has been made and return of allotment has
been filed with the Registrar. The
return of allotment is required to be filed within 15 days of allotment.
3. In case the company defaults in filing the return of
allotment within the time period prescribed above, the company, its promoters,
and directors shall be liable to a penalty for each default of one thousand
rupees for each day during which such default continues but not exceeding
twenty five lakh rupees.
Chapter 5: Acceptance of Deposits by Companies
1. Deposit
Insurance: Omitted
2. Deposit
Repayment Reserve: Deposit Repayment Reserve shall not be less
than twenty percent of the amount of deposits maturing during the following
financial year.
3. Penalty: Provides for stricter penalty in case of
contravention of deposit provisions
Chapter 6: Registration of Charges
1. Satisfaction
of Charge: Timelines for filing
the form for satisfaction of charge shall be on the same lines of
as provided for registration of charge i.e, 300 days
Chapter 7: Management and Administration
1. Significant Beneficial Owner: Significant beneficial owner concept is
introduced and necessary declaration required to be given.
2. Annual General Meeting: Unlisted
companies allowed to convene Annual General Meeting at any place in India with
the approval of all shareholders taken in advance
3. Extra Ordinary General Meeting: Indian Wholly
owned subsidiary of a company incorporated outside India can hold its extra
ordinary general meeting outside India
4. Shorter notice consent: Major changes introduced
with respect to obtaining shorter notice consent in case of general meeting of
the company other than Annual General Meeting (AGM).
Chapter 8: Declaration and Payment of Dividend
1. Interim
Divided: Interim dividend can
be declared from the profits of the said year or from brought forward surplus
in the profit and loss account or the profit generated upto quarter prior to
declaration of dividend. In case of losses,
such interim dividend shall not be declared at a rate higher than the
average dividends declared by the company during immediately preceding three
financial years
2. Dividend: Computation of calculating dividend is
provided. Further, in case of absence of profits or inadequate profits, dividend
can be declared out of accumulated profits earned by the company in previous
years and transferred by the company to free reserves
Chapter 9: Account of Companies
1. Signing of financial statements: Chief executive officer required to sign
financial statements irrespective of whether he is a director or not
2. Corporate Social
Responsibility: Net profit or turnover
criteria for formation of committee and
CSR expenditure is to be calculated based on immediately preceding F.Y.
Currently calculation was on the basis of preceding 3 financial year.
Chapter 10: Audit and Auditors
1. Ratification
of Auditor: Omitted
2. Liability: Restricts the liability of auditor for damages to the
shareholders or creditors of the company instead of any other person. Also, concerned
partners shall be liable in case of criminal liability of any audit firm.
Chapter11: Appointment and Qualifications of
Directors
1. Resident
Director: Director should be
resident in India in that financial year for 182 days instead of previous financial
year. In case of newly incorporated companies, the period is to be calculated
proportionately.
2. Independent Director: In the definition of Independent
director, Pecuniary interest is replaced with pecuniary relationship, other
than remuneration as such director or having transaction not exceeding 10% of
his total income or such amount as may be prescribed.
3. Appointment
of relative of employee:
It
is allowed to appoint a person as ID whose relative is an employee during 3 F.Y
immediately preceding F.Y in which the
ID is proposed to be appointed
4. Deposit
Amount in case of persons standing for Directorship: Deposit of rupees one lakh with respect to
nomination of directors shall not be applicable in case of appointment of
independent directors or directors nominated by nomination and remuneration
committee.
5. Disqualification
of Director: In case a director
incurs any of disqualifications due to non filing of return or repayment of
deposits, he shall vacate office in companies other than the company which is
in default. New Director shall not incur disqualification upto 6 months in the
defaulting company.
6. Number
of Directorship: Directorship in
dormant companies to be excluded for reckoning the limit of directorships of
twenty companies
Chapter 12: Meetings of Board and its Power
1. Participation
in Board Meeting: Participation of
directors on restricted items at Board meetings through video conferencing or
other audio visual means shall be allowed if there is quorum through physical
presence of directors.
2. Audit committee: Every Public listed company is required to
constitute Audit committee rather than every listed company. Related party
transactions other than those prescribed under section 188, if not approved by
Audit committee, will require the approval of Board of Directors.
3. Restrictions
on Powers of Board (Borrowing Power): Borrowing limits revision on upper side i.e, Paid Up
capital + Free Reserves + Securities Premium
4. Loans
to Director: Company is allowed giving loan or
guaranteeing or providing security to certain categories of person in whom any
of the directors is interested subject to passing of special resolution by the
company and utilization of loans by the borrowing company for its principal
business activities.
5. Related
Party Transactions:
Restriction on voting by relatives in the general meeting shall not apply to a company in which 90% or
more members in numbers are relatives of promoters or related parties.
6. Prohibition
on forward dealings and Insider Trading: Prohibition on forward dealings in securities of company and
on insider trading of securities by director or key managerial personnel is
removed.
Chapter 13 - Appointment and Remuneration of
Managerial Personnel:
1.
Appointment of
MD/WTD:
a) The CG approval
for appointment of MD/WTD who has attained age of 70 years is not required if
the same is passed by Special Resolution and the explanatory statement provides
justification for appointment of such person.
b) The
company can appoint MD/WTD who has attained age of 70 years subject to approval
of Central Govt., where the special resolution is not passed but votes cast in
favour of the motion exceeds against the motion.
2. Managerial Remuneration: Approval
of central government has been dispensed with for certain items in case of managerial
remuneration such as payment of managerial remuneration in excess of 11% of the
net profits of the company, payment of managerial remuneration in case of
inadequacy of profit. However the applicability w.r.t. compliance of provision
of schedule V will remain as it is.
Chapter 24- Registration Offices and Fees
1.
Fee for filing
1. 270 days shelter to be removed;
2. Delayed filing fees likely to vary depending
on number of defaults and nature of form to be filed; The same is illustrated
in following table
|
Sr. No.
|
Section
|
Documents to be filed with Registrar
|
Additional Fees Per day (Minimum)
|
Additional Fees Per day (Minimum) in case of Default on 2 or more
Occasions
|
|
1.
|
92 Or 137
|
Annual return Or Financial Statements
|
₹ 100*
|
₹ 200*
|
|
2.
|
Sections other than 92 and 137
|
Other than Annual Filing Forms
|
As may be prescribed*
|
Twice the additional fees as may be prescribed*
|
*Different amounts may be prescribed for
different classes of companies.
