SHORT SUMMARY: In this Flash editorial, the author begins by referring the Key Take Away Companies Amendment Act, 2017.
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.
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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 Act, 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 the 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 the 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 Act, 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 Act, 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 a 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 Shareholders 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 a quorum in a meeting through the 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 the 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 a 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 the abridged form of annual return for One Person Company ('OPC'), Small Company and such other class or classes of companies as may be prescribed.
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.
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