KEY TAKE AWAY – COMPANIES AMENDMENT Act, 2017
SHORT SUMMARY:
In this Flash editorial, the author
begins by referring the Key Take Away Companies Amendment Act, 2017. This is Article No. 301 of Series of articles
The Bill to amend Companies Act, 2013
was passed in Rajya Sabha on 19th December, 2017. This is second
Amendment Bill passed by the Parliament after notification of the Companies
Act, 2013 i.e. within a span of 40 months. The Companies (Amendment) Bill, 2017
suggests 93 amendments to the Companies Act, 2013.
Background:
The major amendments proposed in the Companies Amendment ACT, 2017include
clarity on definitions for identifying Associate Companies, Holding & Subsidiary
Companies, Related Parties etc;, simplification of the private placement
procedure, removal of requirement for annual ratification of auditor,
rationalization of provisions related to loan to directors, and doing away with
the requirement of approval of the Central Government for managerial
remuneration above prescribed Limits.
We hope you will
find the same useful.
A.
Incorporation of Company:
At the time of incorporation of the company,
declaration by each subscriber will be required to be attached instead of an
affidavit, as currently provided.
B. Register Office:
The company shall within 30 days of its incorporation have registered
office instead of current requirement to have registered office on and from the
fifteenth day of its incorporation.
C. Authentication of Document:
The change permits Board to authorise any employee of the company for
authentication of documents, proceedings and contracts of the company
D. Private Placement:
The entire Section 42 has been substituted by the Amendment Bill, 2017.
We will discuss in detail in another write up. Please find below the major
changes:
§ The requirement of filing the record of
private placement with the Registrar within a period of thirty days of
circulation of private placement offer letter has been omitted.
§ The return of allotment is required to be
filed within 15 days of allotment.
§ The company is not to authorize utilize the
money raised through private placement unless allotment has been made and
return of allotment has been filed with the Registrar.
E. Issue of Shares at Discount:
Issuance of shares at discount allowed, subject to the same is issued to
creditors when debt is converted into shares in the prescribed manner.
F. Issue of Sweat Equity Shares:
It is allowed issue of sweat equity shares at any time after
registration of the Company.
G. Right Issue of Shares:
The change in the provision relates to the mode of sending the notice
for rights offer. Section 62(2) has been relaxed to include courier or other
modes of delivery capable of providing proof of deliver
H. Statutory Auditor:
§ The requirement related to annual
ratification of appointment of auditor by members is omitted.
§ Auditors of holding company can have access records
of associate companies also along with subsidiaries Companies.
§ There are some changes relates to language of
Auditors Report.
§ Changes in Penal Provisions for the Auditor
Chapter.
I.
Provisions of Loan & Guarantee:
Section 185 has been completely re-written under the Companies Amendment
Bill, 2017. This Section limits the prohibition on loans, advances, etc., to
any person in which any of the director is interested in.
Under the 2017 Bill, It has been proposed to
allow companies to give loan's or guarantee's or provide security to any person
in whom any of the director is interested in subject to passing of special
resolution by the company and utilization of loans by the borrower for its
principal business activities.
J.
Managerial remuneration: The requirement of
obtaining approval of Central Govt. for payment of managerial remuneration in
excess of prescribed limits of Schedule V done away with instead of CG approval
required the approval of Share holders by passing of Special Resolution.
However, for making such payments prior approval of bank or public financial
institution or non-convertible debenture holder or secured creditor is also
required before taking approval from shareholders.
K. Presence through video Conferencing:
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 on any matter specified under the first proviso (i.e.
restricted matters).
L. Annual General Meeting:
Annual General Meeting (‘AGM’) of unlisted company may be held at any place
in India if consent is given in writing or by electronic mode by all the
members in advance.
M. Extra- Ordinary General Meeting:
Extraordinary General Meeting (‘EGM’) of wholly owned subsidiary of a
company incorporated outside India can be held outside India. The same is of no
relevance for companies which are WOS of company incorporated in India
N. Annual Return:
§ The
requirement of extract of annual return to the board‘s report in Form MGT-9 has
been omitted
§ Sufficient
that the web-link of the annual return be disclosed in the board‘s report.
§ Changed
in the particular of Annual Return.
§ The
Central Government may prescribe abridged form of annual return for One Person
Company (‘OPC’), Small Company and such other class or classes of companies as
may be prescribe.
O.
Abridged Board Report
for OPC and Small Company: The Central Government is
empowered to prescribe an abridged Board’s Report for One Person Company and
Small Company
P.
Extract of Annual
Return (Form MGT-9): Form MGT-9 now does not have to be
accompanied with the Board’s report and instead a link to the annual return
hosted on the website shall be provided in the Board’s report.
(Author
– CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice
from Delhi and can be contacted at csdiveshgoyal@gmail.com). Disclaimer: The entire
contents of this document have been prepared on the basis of relevant
provisions and as per the information existing at the time of the preparation.
Although care has been taken to ensure the accuracy, completeness and
reliability of the information provided, I assume no responsibility therefore.
Users of this information are expected to refer to the relevant existing
provisions of applicable Laws. The user of the information agrees that the
information is not a professional advice and is subject to change without
notice. I assume no responsibility for the consequences of use of such
information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT,
SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION
WITH THE USE OF THE INFORMATION
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