Companies Amendment Act, 2017

Companies Amendment Act, 2017

   1.    “ASSOCIATE COMPANY” [Section 2(6)] {Notified w.e.f. 07th May, 2018} in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company.

Explanation. — For the purposes of this clause, “significant influence” means control of at least twenty per cent of total share capital, or of business decisions under an agreement;

Issue in Definition
Total share capital comprises the aggregate of paid up equity share capital and convertible preference share capital.
Hence a company may be treated as associate company merely bases on ownership of Optionally convertible redeemable preference shares.
Amended Provision

Significant Influence’ under the definition of Associate Company:

Significant influence to mean control of at least 20% of voting power or control or participation in business decision under an agreement.
After Amendment – To check whether a Company is associate Company or not Only Equity share Capital with Voting Right shall be considered.

This Amendment comes in force to remove the ambiguity of considering Convertible Preference share capital to check status as Associate.
Still an Issue
The definition should provide for participation in business decision rather than control thereof. If an investor exercise control over the business decisions, then the company on which the control is exercised is a subsidiary company and not an associate Company.

2.   SUBSIDIARY COMPANY….[Section 2(87)] { Notified w.e.f. 07th May, 2018}
“Subsidiary company” or “subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company

(ii) Exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies

Issue in Definition
This definition also results in issues/challenges similar to those for the definition of the term ‘Subsidiary Company’.
Amended Provision

Exercise or control more than one half of the Total Voting Power
To Check relationship of Holding Subsidiary only Equity Share Capital with Voting Right shall be consider. Preference Share Capital shall not consider.
This will align ‘subsidiary’ definition under the 2013 Act with AS 21 Consolidated Financial Statement. However, it will continue to be different from definition under Ind As.
Definition in Ind AS
Under Ind AS an option to convert to equity shares would be considered for deciding if a company is a subsidiary, provided the option is substantive and exercisable when the relevant decisions are to be taken.

3.   HOLDING COMPANY: [Section 2(46)] { Notified w.e.f. 09th Feb, 2018}
Holding Company”, in relation to one or more other companies, means a Company of which such companies are subsidiary companies;

Unlike the definition of the term ‘subsidiary company’, this definition does not contain any reference to a body corporate.
Amended Provision

The definition of the term ‘Holding Company’, the expression “Company” includes any Body Corporate”.
LLP/ Foreign Co. etc to be considered as ‘Holding Company” if holds more than 50% of voting right in any Company.
We believe it is a minor amendment aimed at correcting an anomaly. It should not have significant financial reporting implication.

4.   DEBENTURE[Section 2(30)] { Notified w.e.f. 09th Feb, 2018}debenture’ includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not.

the phrase ‘any other instrument of a company evidencing a debt’ has made the definition very broad and included instruments such as commercial papers and other money market instruments, which are often used as an important short-term fund raising source by eligible companies and are well regulated under the RBI regulations
Amended Provision

the term debenture will not include the following:
     I.        Instruments referred to in Chapter III-D of the Reserve Bank of India Act, 1934. Chapter III-D of the RBI Act regulates transaction in derivatives, money market instrument, securities etc.
Money market instruments include call or notice money, term money, repo, reverse repo, certificate of deposit, commercial usance bill, commercial paper and such other debt instrument of original or initial maturity up to one year as the RBI may specify from time to time.
   II.        Such other instrument, as may be prescribed by the Central Government in consultation with the RBI.

The term ‘debenture’ will not include money market instruments, which are used for short- term fund raising by eligible Companies and are regulated under the RBI regulations.

5.   FINANCIAL YEAR [Section 2(41)] { Notified w.e.f. 09th Feb, 2018}
Uniform Financial Year
Section 2 (41) of the 2013 Act required companies, except specified International Financial Services Centre (IFSC) companies, to adopt a uniform accounting year ending 31 March.

However, a proviso to the definition states that a company may apply to the National Company Law Tribunal (Tribunal/NCLT) for adoption of a different financial year if it satisfies the following two criteria:
§  It is a holding or subsidiary of a company incorporated outside India.
§  It is required to follow a different financial year for consolidation of its financial statement outside India.

Companies which are associates or joint ventures of a company incorporated outside India did not have right to approach the NCLT for adopting a different financial year-end, though their financial statements were also taken into consideration in the preparation of CFS outside India
Amended Provision

Associate company of a company incorporated outside India can also apply to the NCLT for a different financial year. Hence, the relief will apply to joint ventures also.


6.   KEY MANAGERIAL PERSONNEL….[Section 2(51)] { Notified w.e.f. 09th Feb, 2018}
“Key Managerial Personnel”, in relation to a company, means—
(i)   The Chief Executive Officer or the managing director or the manager;
(ii)  The Company Secretary;
(iii) The whole-time director;
(iv) The Chief Financial Officer; and

Amended Provision

To include (v) “such other officer not more than one level below the directors who is in whole time employment and designated as KMP by the Board
Board of Directors can appoint a person one level below Director also as KMP.
7.   NET WORTH….[Section 2(57)] { Notified w.e.f. 09th Feb, 2018} 
“net worth” means the aggregate value of the paid
-up share capital and all reserves created out of
the profits and securities premium account, after
deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation

Amended Provision

To include “AND the Debit or Credit balance of Profit and Loss account in the calculation of Net Worth”.
Credit balance of P&L will increase the net worth and
Debit balance of P&L with decrease the net worth
Net worth of Company reflects the ‘intrinsic value’. Hence this is a clarificatory change, one that was important to make.

8.   TURNOVER….[Section 2(91)] { Notified w.e.f. 09th Feb, 2018}
“Turnover” means the aggregate value of the realization of amount made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year.

From the definition, it was not clear whether indirect taxes such as excise duty/Goods and Services Tax (GST) will be included in or excluded from turnover
Example: . From a financial reporting perspective, a company collects GST on behalf of the Government and therefore it is excluded from revenue. Consequently, it was not clear whether the determination of turnover under the 2013 Act will be in line with the financial statements or it will be the gross amount received from customer.
Amended Provision

Turnover to mean the gross amount of revenue recognized in the profit and loss account from the sale, supply, or distribution of goods or on account of services rendered, or both, by a company during a financial year
Net of Taxes to be Considered. (revenue included GST)
Hence, going forward, revenue recognized in the financial statements will be turnover under the statute as well


Small Company
[Section 2(85)]
Notified 09.02.2018
To Check the status of Company as Small or not “Turnover should be as per profit and loss account for the immediately preceding financial year” and not as per its last financial year.
Cost Accountant
[Section 2(28)]
Notified 09.02.2018
Cost Accountant means a person who is a member of the Institute of Cost Accountants of India and who hold a Valid Certificate of Practice.

Amendment in Sections

A.               New Section 3A- Members Severally Liable certain Cases:
{Notified w.e.f. 9th February, 2018}

In case Number of Members reduced from Statutory Minimum i.e. 2 in case of Private Limited Company or 7 in case of Public Limited Company, Company carry business for more than 6 month.

Then the member shall be liable for the payment of the whole debts of the Company contracted during that time.

This Section was there in the Companies Act, 1956 Section 45 but was missing from the Companies Act, 2013.
I.        Alteration in Period of reservation of Name - Section 4(5)(i) - Memorandum:: {Notified}
As per CAA-2017, the name shall be preserved for the following period:

·        In case of Incorporation of New Company: Name shall be reserved for the 20 days from the date of approval. (earlier it was available for 60 days)

·        In case of Change of Name: Name shall be reserved for the 60 days from the date of approval.

II.        Affidavit by Subscriber – Section 7:: {Notified w.e.f. 27th July, 2018}

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.

III.        Registered Office – Section 12:: {Notified w.e.f. 27th July, 2018}

The company shall within 30 days of its incorporation have registered office instead of current requirement to have registered office on and from the 15 day of its incorporation

Notice of Every Change of the situation of the registered office shall be given to the Registrar within 30 days instead of 15 days.

IV.        Authentication of Documents [Section 21]:: {Notified w.e.f. 9th Feb, 2018}

The change permits Board to authorise any officer or employee of the company for authentication of documents, proceedings and contracts of the Company.

Earlier, any Key Managerial Personnel duly authorized by Board only can authenticate the documents, proceedings and contracts of the Company.
a)   Exemption List of Charges [Section 77]:: {Notified w.e.f. 07th May, 2018}

This section shall not apply to certain charges, as may be prescribed by the Central Government in consultation with the Reserve Bank of India.
(Like: Hypothecations, Pledge etc.) 

b)  Time Period for Satisfaction of Charges [Section 82]:: {Notified w.e.f. 05th July, 2018

Timeline for filing of satisfaction of charge is to be increased to 300 days on payment of additional fee. (Same as creation of charge)


{Notified w.e.f. 7th August, 2018}

The entire Section 42 has been substituted by the Amendment Act, 2017. Please find below the major changes:

1.      Maximum No. of persons to whom offer can be made: 

§ An offer can be made under a Private Placement Offer Letter to not more than 2000 people in a financial year.
§ The 20 people limit excludes Qualified Institutional Buyers and Employees of the Company being offered securities under a scheme of employee stock option in terms of provision of clause (b) of sub section 62(1) 

A.  Whether Limit of 200 persons shall be calculated individually/ jointly for each type of securities?

The restriction of 200 persons would be reckoned ‘Individually’ for each kind of security that is ‘Equity Shares, Preference Shares or Debentures’.

2.      Right of Renunciation:
The Private Placement offer shall not carry any renunciation right. Only the person in whose name offer letter issued can apply for the subscription.

3.      Modes for Payment of Subscription Money:
Subscription money shall be paid either by cheque or demand draft or other banking channel or not by cash. Shares under Private Placement can’t be subscribed by payment in cash. 

4.      Use of Allotment Money:
A company shall not utilize monies raised through private placement unless allotment is made and the return of allotment (i.e. e-form PAS-3) is filed with the Registrar in accordance with sub-section (8).

This is major change by Amendment Act, 2017. After amendment without filing of e-form PAS-3 for allotment of Shares Company can’t use the funds received from subscription.

Food for Thought::
What shall be the implication if Company use money, before filing of e-form PAS-3?
5.      No further offer till completion of earlier offer:
No offer or invitation of security shall be made unless allotments with respect to offer or invitation made earlier in respect of any other kind of security in completed.

6.      Separate Bank Account:
The money so received shall be kept in a separate bank account of the   
company and utilized only for allotment (or repayment).

7.      No need of filing of PAS-4 and PAS-5:
There is no need to file GNL form with ROC for Offer Letter in PAS-4 and PAS-5.

8.      If not allotted within 60 days:
If allotment is not made within 60 days then till 75th day the monies have to be repaid. Failure to repay has a liability of interest at 12% pa.

b)  Allotment of Share at Discount- Section 53:: {Notified w.e.f. 9th February, 2018}

Issuance of shares at discount allowed, subject to the same is issued to creditors when debt is converted into shares in pursuance of any statutory resolution plan or debt restructuring scheme in accordance with any guidelines or directions or regulations specified by Reserve Bank of India under the Banking Regulation Act, 1949 or the Reserve Bank of India Act 1934.

c)   Issue of Sweat Equity Shares- Section 54:: {Notified w.e.f. 07th May, 2018}

It is allowed issue of sweat equity shares at any time after registration of the Company.

d)  Right Issue of Shares- Section 62:: {Notified w.e.f. 07th May, 2018}
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 delivery.

Right issue of offer letter can be sent through courier also.


i.     The requirement of extract of annual return to the board‘s report in Form MGT-9 has been omitted. 
ii.     Sufficient that the web-link of the annual return be disclosed in the board‘s report. 
iii.  Requirement related to disclosing indebtedness omit from the Annual Return. 
iv.        Changed in the particular of Annual Return 
v.        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. 
·        Whether shares are listed on stock exchange
·        Particular of Holding Or Subsidiary Companies
·        Remuneration to Directors or Key managerial Personnel
·        Net worth
·        Turnover

vi.      Removal of reference of Section 403: {Notified w.e.f. 07th May, 2018}
Due to this amendment Companies shall be required to file the Annual Return within 60 day of AGM from 61st day it shall be considered as default. Now the additional time period of 270 days removed from this sub section.

Impact of this Amendment:
In case of company fails to file Annual return within 60 days of AGM
     i.        Company and the officer shall be liable to fine from the 61st day itself.
   ii.        Additional fees shall be Rs. 100/- per day from 61st Day in case of one time default.
  iii.        Additional fees shall be double from 61st Day in case of continue default more than once.

F.    General Meeting:
Annual General Meeting- Section 96:: {Notified w.e.f. 13th June, 2018}
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.

Extra- Ordinary General Meeting- Section 100:: {Notified w.e.f. 07th May, 2018}
Extraordinary General Meeting (‘EGM’) of wholly owned subsidiary of a company incorporated outside India can be held outside India.

Convening of general meetings at a shorter notice i.e. - Section 101:: {Notified w.e.f. 07th May, 2018}
§  In case of an annual general meeting with the consent of at least 95% of the members entitled to vote thereat and 

§  In case any other general meeting with the consent of at least majority in number (i.e. more than 50%) and 95% (ninety five percent) of such part of the paid up share capital of the company giving a right to vote at such a meeting.
G.  Statutory Auditor:
{Notified w.e.f. 7th May, 2018}
The auditor of a company is appointed by the shareholders at the AGM, for a consecutive period of five years. However, the appointment needs to be ratified each year at the AGM. The 2013 Act was silent on the implications of non-ratification of the auditor appointment at the AGM. In the absence of clarity, the following two views were possible:

§  If shareholders do not ratify the appointment of the auditor at the AGM, it would tantamount to removal of the auditor from the office.

§  Section 140(1) of the 2013 Act requires that the auditor appointed under section 139 can be removed from its office before the expiry of term only by passing a special resolution of the company at the AGM and after obtaining previous approval from the Central Government

However, The Committee was of the view that a company should not be allowed to remove the auditor merely by non-ratification at the AGM. Rather, it should be required to follow procedures for removal of the auditor before the completion of the five-year term, viz., special resolution at the general meeting and approval from the Central Government

§  Ratification of Auditor- Section 139:: {Notified w.e.f. 07th May, 2018}
The requirement related to annual ratification of appointment of auditor by members is omitted. This change will avoid potential conflict between two requirements and is supportive of auditor independence

This provision is supportive to auditor independence.

§  Access of Accounts of Associate Company::
Earlier Holding Company could have the right to access records of associate companies. Auditors of holding company can have access records of associate companies also along with subsidiaries Companies

§  Qualification & Disqualification of Auditor- Section 141:: {Notified w.e.f. 09th February, 2018}
A 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.

Services u/s 144(1)
(a) accounting and book keeping services;
(b) internal audit;
(c) design and implementation of any financial information system;
(d) actuarial services;
(e) investment advisory services;
(f) investment banking services;
(g) rendering of outsourced financial services;
(h) management services; and
(i) any other kind of services as may be prescribed

There will be no restrictions in rendering these services to another companies.

§  Fine in case of failure to file resignation by Auditor in ADT-3 reduced to 50,000/- or the remuneration of auditor whichever is less.

H. Director:
§  For the purpose of Resident Director 182 days to be computed with reference to Financial Year. However, 182 days stay in India in the current financial year and not the previous financial year. {Notified w.e.f. 07th May, 2018}
§  In case of New Companies requirement of 182 days shall apply proportionately at the end of the financial year. {Notified w.e.f. 07th May, 2018}

Suggestion: Companies will need to plan in advance so that they are compliant with this requirement at the end of the financial year. In some cases, they may even need to enter into an arrangement with one or more directors so that they stay in India for a minimum 182 days in the financial year.

§  The requirement of 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 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. (Section 160) {Notified w.e.f. 09th Feb, 2018} 

§  Directorship in the Dormant Company shall not be including in the limit of 20 Companies.

§  Filing of e-form DIR-11 by retiring Director is Optional. (Section 168) {Notified w.e.f. 07th May, 2018}

§  A person holding directorship in the Company can’t appoint as alternate Director. (Section 161) {Notified w.e.f. 07th May, 2018}

§  Companies may fill casual vacancy by the Board and casual vacancy filed by the Board shall be subsequently approved in the immediate next general meeting. (Section 161) {Notified w.e.f. 09th Feb, 2018} 

§  Disqualification for appointment of Director Section 164: {Notified w.e.f. 07th May, 2018}
When a Director is appointed in Company which is in default of filling of Financial statement or annual return or repayment of deposits or pay interest or redemption or debentures or payment of interest or redemption of debentures payment of interest thereon or payment of dividend such director shall not incur the disqualification for a period of 6 month from the date of his appointment.

§  Vacancy of Office of Director Section 167. {Notified w.e.f. 07th May, 2018}

If the Director incurs disqualification mentioned in section 164(2), then he shall vacant office in all the Companies other than the Company which is in default.

I.       Board Meeting:
a)   Presence through video Conferencing: (Section 173) {Notified w.e.f. 07th May, 2018}
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).
Restricted Matters:
(i) the approval of the annual financial statements;
(ii) the approval of the Board’s report;
(iii) the approval of the prospectus;
(iv) the Audit Committee Meetings for consideration of financial statement
(v) the approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover

b)  Audit Committee: (Section 177) {Notified w.e.f. 07th May, 2018}
Only Every Listed Public Company shall constitute Audit Committee. Companies listed due to debenture listing not required Audit Committee.

c)   Nomination & Remuneration Committee: (Section 178) {Notified w.e.f. 07th May, 2018} Only Every Listed Public Company shall constitute Nomination & Remuneration Committee. Companies listed due to debenture listing not required Nomination & Remuneration Committee.

J.            Director Report {Notified w.e.f. 31st July, 2018}
§  The requirement of the extract of the annual return in Form MGT-9 to be included in the board‘s report has been omitted, instead web address or link of the annual return to be provided in Board Report.
§  Disclosures which have been provided in the financial statement shall not be required to be reproduced in the report again (like: Section 186, 188)

§  Instead of exact text of the policies, key feature of policies along with its web link shall be disclosed in Board report.

§  Abridge Board Report for Small Companies and OPC

Disclosures to be mentioned in Directors’ Report:
a)   The web address, if any, where annual return referred to in sub-section (3) of section 92 has been placed;

b)   Number of Meeting of Board of Directors

c)    Directors responsibility statement as referred in sub-section 5 of section 134

d)   Details in respect of frauds reported by auditors under sub-section (12) of section 143 other than those which are reportable to the Central Government.

e)    Explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report.

f)     The state of the Company’s affairs;

g)   The financial summary and highlights;

h)   Material changes from the date of closure of the financial year in the nature of business and their effect on the financial position of Company.

i)     The details of directors who were appointed or have resigned during the year;

j)     The details or significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operation in future.

K.         Financial Statement:

§  Sign of Financial Statement: {Notified w.e.f. 07th May, 2018}
CEO whether appointed as director or not will sign the financial statement. Therefore, now onwards CS, CFO and CEO all three are required to sign the financial statement mandatory. 

§  Unaudited Foreign Subsidiary financials:
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.

§  Placement of Financial of Subsidiary on website:
Only listed Companies having a subsidiary or subsidiaries will be required to place separate audited accounts in respect of each of subsidiary on their website, if any. This requirement will not apply to non-listed Companies.

§  Inspection of Subsidiary Financials:
Both listed and non-listed companies will be required to provide subsidiary financial statements to a member of the Company who asks for it.

§  Removal of reference of Section 403: Due to this amendment Companies shall be required to file the Financial Statement within 30 day of AGM from 31st day it shall be considered as default. Now the additional time period of 270 days removed from this sub section.

In case of company fails to file Financial Statement within 30 days of AGM Company and the officer shall be liable to fine from the 31st day itself.

L.           DEPOSIT (Section 73-76)
{To be notified w.e.f. 15th August, 2018}
§  A Company accepting deposit will be required to deposit and keep in a schedule bank the amount which is not less than 20% of the amount of deposits maturing during the current financial year.
There will be no need to deposit any amount in respect of deposits maturing in the next financial year.

§  Deposit Insurance: Requirement of providing Deposit Insurance Omit.

§  The Companies Law Committee observed that this requirement was too harsh on companies which may have defaulted due to reasons beyond their control, such as industry conditions at some point of time in the past but have repaid such deposits with earnest efforts thereafter. Imposing a lifelong ban for a default anytime in the past would be inappropriate.

§  Company which had defaulted in repayment of deposits can also accept deposit after a period of 5 years from the date of making good the default. 

M.     Loan to Director: {Notified w.e.f. 07th May, 2018}
Section 185 has been completely re-written under the Companies Amendment Act, 2017. This Section limits the prohibition on loans, advances, guarantee, Security etc., to any person in which any of the directors are interested.
A. List of Restricted Person:
A Company can’t give Loan/ Guarantee/ Security to following below mentioned person:
I.            Not Allowed
        i.            Any director of Company, or
      ii.            Any director of a Company which is its Holding Company, or
    iii.            Any partner of Director of lender company, or
    iv.            Any relative of Directors of Lender Company, or
      v.            Any firm in which any of Director of Lending Company is Director, or
    vi.            Any firm in which any relative of Director of lending Company is Director

II.            Not Allowed if fails to pass special resolution:
                         i.            Any Private Company of which any such Director is a Director or member;
                   ii.            Body Corporate in which 25% or more voting power rests with one or more directors;
                  iii.            Body Corporate whose Board accustomed to act on directions of BOD or Directors of lending company

B. List of Permissible Person:

III.            Allowed if, Special Resolution Passed:

                     i.            Any Private Company of which any such Director is a Director or member;
                 ii.            Body Corporate in which 25% or more voting power rests with one or more directors;                                                        
                 iii.            Body Corporate whose Board accustomed to act on directions of BOD or Directors of lending company

Loan to above mentioned entities are allowed after fulfilling below mentioned both conditions:
                   i.            Special Resolution passed by the Company in General Meeting.
                ii.            The loans are utilized by the borrowing company for its principal business activities.

IV.            Allowed without falling u/s 185(1) and (2):
                       i.            Loan to Managing Director or Whole Time Director.
                     ii.            L/G/S under ordinary course of business.
                    iii.            L/G/ S to wholly owned subsidiary Company
                     iv.            Loan to Subsidiary Company.

V.            Allowed without falling u/s 185:

                            i.            Loan to any Public Company (having common Director/ Shareholder or not).
                ii.            Private Company fulfilling all 3 conditions mentioned in Exemption Notification dated: 05th June, 2015.
                    iii.            Guarantee / Security provided for the purpose other than loan taken by other entity.
                 iv.            Loan to Holding Company (subject to condition that holding Company doesn’t have common directors)
                   v.            Loan to Subsidiary Companies (subject to condition that subsidiary Company doesn’t have common directors)


Above mentioned entities are not fall u/s 185, therefore Company can give Loan/ Guarantee/ Securities to above mentioned entities freely without any restriction / compliance of Section 185.

N.     Change in Filing Fees: {Notified w.e.f. 07th May, 2018}

A.  Additional Late Filing Fees: in sub-section (1), for the first and second provisos, the following provisos shall be substituted:
Effect of new proviso:
·        If Company fails to file Annual Return u/s 92 and Financial statement u/s 137 within time prescribed under their specific sections “without prejudice to any other legal action or liability under this act,” it may be submitted by payment of additional fees which shall not be less than INR 100/- (Rupees Hundred) per day” and different amount may be prescribed for different classes of Companies.

·        If company fails to file any other documents, facts, information etc other than section 92 and 137 “without prejudice to any other legal action or liability under this act,” it may be submitted by payment of additional fees as may be prescribed.
HIGHER ADDITIONAL FEES: New concept of higher additional fees has been introduced. As per this proviso
-          Where there is default on Two or More occasions in submitting, filling, registering, recorded of documents,
-          without prejudice to any other legal action or liability under this act,
-          may be file with “Higher Addition Fees”
-          as may be prescribed and
-          which shall not be lesser than twice the additional fee provided under first and second proviso”

Due to above mention proviso if company fails to file any form with in time prescribed under its specific section and company made the default TWO or “MORE OCCASION” then additional fees for filing of from shall be “TWICE of ADDITIONAL FEES

In case Companies fails to file Annual forms for Any Previous Financial years whether under Companies Act, 1956/ 2013 till 30th  June, 2018. In such case Company have to pay additional fees as per these rules.
Following below mentioned annual filing forms:

S. No.
Purpose of Filing
Section Involved

(including AOC-4 XBRL, AOC-4 CFS 23AC,ACA)
Filing of Financial Statements
Section 137
Within 30 days of AGM
(Including 20B)
Filling of Annual Return
Section 92
Within 60 days of AGM

What shall be additional Fees in above mentioned Situation?
A.     Filing of Annual Form for f.y. ended on or before 31st March, 2018
B.      Company having capital of Rs. 100,000/- and date of AGM 30.09.2018.
Additional Fees shall be as follow:
Actual Filing Date
Actual Fees
Till 29th October
From 1st October, 2018
Rs. 100/- per day
Total Fees
29th October, 18
Rs. 300
30th October, 18
Rs. 300
28th November, 18
Rs. 300
28th December, 18
Rs. 300

O.        Remuneration to Managerial Personnel: Section 197)

Section 197(1):
The total managerial remuneration payable by a Public Company, to its:
              i.        Directors, and
             ii.        Managing Director and
           iii.        Whole-Time Director, and
           iv.        Manager

 in respect of any financial year shall not exceed eleven per cent. of the net profits of that company for that financial year computed in the manner laid down in section 198 except that the remuneration of the directors shall not be deducted from the gross profits.
However, such limits may be exceeded with the approval of the shareholders and the Central Government.
Currently, the laws in countries such as the US, the UK and Switzerland do not require a company to approach government authorities for approving remuneration payable to their managerial personnel, even in a scenario where the company has losses or inadequate profits.

Companies Amendment Act, 2017 The word “with the approval of Central Government” removed from every place under this section.

§  No need approval of CG for payment of remuneration more than 11% of net profit,

§  No need of CG approval of recovery of any sum refundable from director.

Inadequate Profit: No need of CG approval for remuneration in situation of no profit or inadequate profit. In such case remuneration shall be paid according to Schedule V.

PART II                                                               SECTION II                                            SCHEDULE V
Remuneration payable by companies having no profit or inadequate profit

Above mentioned section of part II States about remuneration to Directors including MD/WTD / Manager.
No Profit: This is situation when Company is in loss, it doesn’t have any profit in its financials.
Inadequate Profit: This is situation when Company is having sufficient profit in its financials for payment of remuneration. However, profit is not sufficient to cover in limit of 11% of net profit. Exp.

S. No.
Profit Amount
11% of Profit
Remuneration want to pay
Inadequate Profit
Inadequate Profit
No Profit

As per Schedule V, Part II, Section II company can pay remuneration more than 11% by following the below mentioned:
Company by passing of Ordinary Resolution in General Meeting can pay remuneration upto below mentioned limit:
Where the effective capital is
Limit of yearly remuneration payable shall not exceed (Rupees)
(i) Negative or less than 5 crores
60 Lakhs
(ii) 5 crores and above but less than 100 crores
84 Lakhs
(iii) 100 crores and above but less than 250 crores
120 Lakhs
(iv) 250 crores and above
120 lakhs plus 0.01% of the effective capital in excess of Rs. 250 crores:

Company by passing of Special Resolution in General Meeting can pay remuneration ANY AMOUNT without any limit:

For payment of remuneration as per above mention Limit of Section II Company have to comply with following conditions:
        i.            Board Resolution: payment of remuneration is approved by a resolution passed by the Board and, in the case of a company covered under sub-section (1) of suction 178 also by the Nomination and Remuneration Committee

      ii.            No Default: the company has not committed any default in payment of dues to any bank or public financial institution or non-convertible debenture holders or any other secured creditor, and in case of default, the prior approval of the bank or public financial institution concerned or the non-convertible debenture holders or other secured creditor, as the case may be, shall be obtained by the company before obtaining the approval in the general meeting.

    iii.            General Meeting: an ordinary resolution or a special resolution, as the case may be, has been passed for payment of remuneration as per item (A) or (B), at the general meeting of the company for a period not exceeding three years.

     iv.            Notice of General Meeting: a statement along with a notice calling the general meeting referred to in clause (iii) is given to the shareholders containing the following information as mention in schedule:-

      v.            Company Secretary Certificate:
The auditor or the Secretary of the company or where the company is not required to appointed a Secretary, a Secretary in whole-time practice shall certify that the requirement of this Schedule have been complied with and such certificate shall be incorporated in the return filed with the Registrar under sub-section (4) of section 196.

    P.    OTHERS
A. Conversion of Partnership firm or LLP into Company: (Section 366)
{To be notified w.e.f. 15th August, 2018}

Now it is allow converting the partnership firm, LLP etc with 2 or more partners into private company.

B.  Section 446A – Factor for determining level of punishment” { Notified w.e.f. 09th Feb, 2018}
According the this Section the Court or Special Court while deciding the amount of fine or imprisonment under this Act, shall have due regard to the following factors, namely
(a) Size of the company;
(b) Nature of business carried on by the company;
(c) Injury to public interest;
(d) Nature of the default; and
(e) Repetition of the default

Note: After the amendments court shall consider the factors for penalize the Company. It is a good move to consider the different-2 factors for penalty in case of non –compliance.

C.  “Section 446B – Lesser penalties for One Person Companies or Small Companies” { Notified w.e.f. 09th Feb, 2018}
In this section relief to OPC and Small Companies i.e. in case of failure to comply with provisions of
§  Section 117(2)(c) – Resolution and Agreement to be filed
§  Section 137(3) – Copy of Financial statement to be filed
§  Section 92(5) – Annual Return
In case of default, such company and officer in default of such company shall be punishable with fine or imprisonment or fine and imprisonment, as the case may be, which shall not be more than one-half of the fine or imprisonment or fine and imprisonment, as the case may be, of the minimum or maximum fine or imprisonment or fine and imprisonment, as the case may be, specified in such sections.

D. Postal Ballot: {Notified w.e.f. 07th May, 2018}
Companies which are mandatorily required to provide electronic voting facility, to transact item in general meeting, can transact business of postal ballot also through electronic voting.



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