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Published in: Law, Ethics and Communication
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Company law

Agarwal R / Jhansi

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Teaches: ACCA, CA - CPT, CA - Final, CA - IPCC, CFA, CFP, CIMA Certification, CMA Final, CMA Foundation, CMA Intermediate, CMA-CPA-ACCA-CIMA, CPFA, CS - Executive, CS - Foundation, CS Professional, Direct Tax Laws, ICWA & ICWAI, All Subjects, Accountancy, Algebra, Anatomy, Anthropology, Arts Group, Bengali, Bio Technology, Biology, Botany, Business Mathematics, Business Organisation, Business Studies, Chemistry, Commerce Subjects, Computer Science, Costing, Economics, Education, English, EVS, Fashion Study, Food & Nutrition, Geography, Hindi, History, Home Science, IT & Computer Subjects, KVPY Exam, Logic, Mathematics, Philosophy, Physics, Physiology, Political Science, Psychology, Sociology, Statistics, Zoology, Marathi, NSTSE, NTSE, School Level Computer, Social Studies, Special Education, Administrative Laws, Civil Laws, CLAT, Company Laws, Contract Act Laws, Criminal Laws, Jurisprudence, Law Entrance, LLB, LLM, Tax Laws, BBA Entrance, BBA Subjects, BHA, BTTM, Forex Trading, Management Subjects, MBA Entrance, MHA, MTTM

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  1. Th qompanies (A endment) ) Bill, 2016 A Boost towards industri I growth ared by:- ETI WAL
  2. Introduction The new Companies Act has been in force from 1st April 2014. Many provisions have been extremely hard on the business. Thus, the Central government on 16th of March, 2016 introduced in the Lok Sabha a bill to further amend the Companies Act, 2013 as part of efforts to address difficulties faced by stakeholders, improve the ease of doing business in the country and to give a boost to industrial sector. Most of the changes are to simplify, soften the provisions of the Act. The Bill proposes to amend about 87 sections of the act. COMPANY BILL
  3. Objects and reasons for the PI'0P0sed changes Addressing difficulties in implementation owing to stringency of compliance requirements. Facilitating ease of doing business in order to promote growth with employment. Harmonization with accounting standards, the Securities and Exchange Board of India Act, 1992 and the regulations made there under, and the Reserve Bank of India Act, 1934 and the regulations made there under. Rectifying omissions and inconsistencies in the Act. Carrying out amendments in the provisions relating to qualifications and selection of members of the National Company Law Tribunal and the National Company Law Appellate Tribunal in accordance with the directions of the Supreme Court.
  4. Incorporation and objects of companies 1. Reservation of Name: At present one could reserve the approved name of the Company for a period of 60 days. In the Bill the word 60 days is substituted with the word "20 days from the date of approval". 2. Affidavit in respect of Subscribers to Memorandum: At present an affidavit from each of the subscribers to the memorandum and from the persons named as first directors, if any, in the articles that he has not convicted of any offence.. In the Bill the word affidavit is substituted with the word "declaration". 3. Omission of having specific Main Object: The bill provides that the company may engage in any lawful act or activity or business or any act or activity or business to pursue any specific object or objects, as per the law for the time being in force. In case the Company proposes to pursue any specific object, the Memorandum shall state that object in such case the company shall not pursue any act or activity or business, other than specific objects.
  5. For universal object companies, the doctrine of ultra vires becomes meaningless. Now the only internal requirement for commencing a new business will be a board resolution for diversification of business. 4. Intimation regarding Change in Registered Office to Registrar of Companies: The Bill proposes to increase the time- limit to 30 days instead of 15 days at present from the date of change in address of the registered office of the Company. Register Company
  6. Private Placement A company shall not utilize monies raised through private placement unless allotment is made and the return of allotment is filed with the Registrar of Companies. A company may, at any time, make more than one issue of securities subject to maximum number of identified persons. + Time limit for filing return of allotment in Form PAS-3 to be reduced to 15 days from 30 days from the date of allotment. + Penalty on promoters and directors for contravention of the provisions of private placement to be amended as amount raised through such offer or 2 crore, whichever is lower. (Earlier it was amount involved in such offer or 2 crore, whichever is higher)
  7. issue of shares Issue of shares at discount: The Company having losses, obviously have net value of shares lower than par. However companies Act, forced the lenders to convert the shares at par value. In order to resolve the problem a new provision is inserted in the bill that company may issue shares at a discount to its creditors when its 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 the Reserve Bank of India under the Reserve Bank of India Act, 1934 or the Banking (Regulation) Act, 1949. Issue of sweat equity shares: With a view to encourage the emerging startups and entrepreneurs the company may now issue sweat equity shares after its incorporation without waiting for one year.
  8. Deposits cf. izz Acceptarmce of Deposits Corporate Professionals The amount which is required to be deposited to deposit repayment reserve account has been increased from 15% to 20% of the amount of its deposits maturing during following financial year and kept in a scheduled bank in a separate bank account. + Provisions of deposit insurance to de done away with.
  9. + Repayment period of deposits accepted before the commencement of Companies Act, 2013 is proposed to be enhanced to 3 years instead of 1 year from the commencement of the act, or before the expiry of the period for which the deposits were accepted, whichever is earlier. By extending the payment period, it is an intermediary relief for companies who have deposits lying in their account. • The provision for punishment for contravention of the provisions of deposits is proposed to be amended. As per the bill the Company shall be liable in addition to the payment of the amount of deposit or part thereof, be punishable with fine of "one crore rupees or twice the amount of deposit accepted by the company, whichever is lower".
  10. Charges Registered + Section 77 of the Companies Act, 2013 to be amended to provide for exemption from registration of such charges as may be prescribed, in consultation with Reserve Bank of India. The period for registration for modification and satisfaction of charge is proposed to be extended. Existing provision allow extension of time for filling of charge only in case of creation. Thus the bill proposes to amend the said provision by permitting filing of modification and satisfaction of charge also within 300 days.
  11. Annual Return Annual Accounts Annual Return Extracts of Annual Return MGT-9 goes off: • Instead full annual return to be put on the website of the company. • This is applicable to every company, if the company has a website . • Many companies may have commercial websites they may not have investor information. • Website here should mean website containing investor information. • This reduces paperwork and makes for easier compliances. MGT-10 • The deletion of MGT-10 should be a relief for most listed companies. • Changes in top 10 shareholders holdings and promoters holding required to be filed within 15 days of the change. • Requiring companies to do a weekly monitoring.
  12. inspection of register of The registers required to be kept and maintained by a company under section 88 and copies of annual return shall be kept at the registered office of the company. The registers and the copies of annual return shall be open for inspection by any member, debenture holder, other security holder or beneficial owner during business hours without payment of any fees. proviso added in section 94(3) empowers the Central Government to prescribe the particulars of register of members that will not be available for inspection. The idea behind it may be to prevent some information which may not be available for extraction. For example PAN Nos. etc.
  13. GENERAL MEETING General IVieetings Under the Companies Act, 1956: AGM - To be held in the same city, place or village where the registered office of the company is situated. EGM - There was no control. Under the Companies Act, 2013: AGM - To be held in the same city, place or village where the registered office of the company is situated. EGM — Control was introduced through rules, saying EGM could be held in India only. Proposed Amendments: AGM — In case of a listed company to be held in the same city, place or village where the registered office of the company is situated and in case of unlisted company with prior consent of all members any place in India. EGM — Control was introduced through rules, saying EGM could be held in India only.
  14. Notice of IVieeUng In Companies Act 2013: A general meeting of a company may be called by giving by giving not less than clear twenty-one days notice either in writing or through electronic mode in such a manner as may be prescribed Provided that a general meeting may be called after giving a shorter notice if consent is given in writing or by electronic mode by not less than ninety five percent of the members entitled to vote at such meeting. Companies (Amendment) Bill, 2016 "Provided that a general meeting may be called after giving shorter notice than that specified in this sub-section if consent, in writing or by electronic mode, is accorded thereto-
  15. i) in the case of an annual general meeting, by not less than ninety-five percent of the members entitled to vote thereat; and (ii) in the case of any other general meeting, by members of the company— (a) holding, if the company has a share capital, not less than ninety-five per cent of such part of the paid-up share capital of the company as gives a right to vote at the meeting; or (b) having, if the company has no share capital, not less than ninety-five per cent. of the total voting power exercisable at that meeting: Provided further that where any member of a company is entitled to vote only on some resolution or resolutions to be moved at a meeting and not on the others, those members shall be taken into account for the purposes of this sub-section in respect of the former resolution or resolutions and not in respect of the latter. MEETING NOTICE!
  16. Postal Ballot In Companies Act 2013: A company shall in respect of such items of business as the Central Government may, by notification, declare to be transacted only by means of posal ballot. In Companies (Amendment) Bill, 2016 the following proviso shall be inserted namely: In section 110 of the principal Act, in sub-section (1), the following proviso shall be inserted, namely: "Provided that any item of business required to be transacted by means of postal ballot under clause (a), 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. "
  17. Declaration of Dnvndend In Companies Act 2013: The Board of Directors of a company may declare interim dividend during any financial year out of the surplus in the profit and loss account and out of profits of financial year in which such interim dividend is sought to be declared Provided that in case the company has incurred loss during the current financial year up to the end of the quarter immediately preceding the date of declaration of interim dividend, such interim dividend shall not be declared at higher rate than the average dividends declared by the company during the immediately preceding three financial years.
  18. In Companies (Amendment) Bill, 2016 the following provisions shall be inserted namely: In section 123 of the principal Act, for sub-section (3), the following sub- section shall be substituted, namely: (3) The Board of Directors of a company may declare interim dividend during any financial year or at any time during the period from closure of financial year till holding of the annual general meeting out of the surplus in the profit and loss account or out of profits of the financial year for which such interim dividend is sought to be declared or out of profits generated in the financial year till the quarter preceding the date of declaration of the interim dividend: Provided that in case the company has incurred loss during the current financial year up to the end of the quarter immediately preceding the date of declaration of interim dividend, 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."
  19. Corporate Social Responsibility In Companies Act 2013: Every company having net worth of rupees five hundred crores or more, or turnover of rupees one thousand crores or more or a net profit of rupees five crores 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 independent director. In Companies (Amendment) Bill, 2016 the following word shall be substituted and proviso shall be inserted, namely: (a) for the words "any financial year", the words "the immediately preceding financial year" shall be substituted; Provided that where a company is not required to appoint an independent director under sub-section (4) of section 149, it shall have in its Corporate Social Responsibility Committee two or more directors.
  20. Copy of financial statement to be filed with Registrar In Companies Act 2013: Forth proviso: Provided also that a company shall, along with it's financial statements to be filed with the Registrar, attach the accounts of it's subsidiary or subsidiaries which have been incorporated outside India and which have not established their place of business in India. In Companies (Amendment) Bill, 2016 the following proviso shall be Inserted namely In section 137 of the principal Act, in sub-section (1), after the fourth proviso, the following proviso shall be inserted, namely: 'Provided also that in the case of a subsidiary which has been incorporated outside India (herein referred to as "foreign subsidiary"), which is not required to get its financial statement audited under any law of the country of its incorporation and which does not get such financial statement audited, the requirements of the fourth proviso shall be met if the holding Indian listed company files such unaudited financial statement along with a declaration to this effect and where such financial statement is in a language other than English, along with a translated copy of the financial statement in English.'.
  21. Managerial Public Company Total Managerial Remuneration Remuneration Company Individual Limits Private Company Provision of Section 197 not applicable Company has more than one MD/WTD/Manager U to of Net Profits of the company Board Resolution Comp/ny has any one of MD/WTD/Manager Exceeding 11% of Net Profits of the company Ordinauy Resolution, subject to the provisions of Schedule Prior approval of Banks, Public Financial Institutions, Non-convertible Debenture holders or secured creditors (applicable in case of defaulting companies) Remuneration payable to MD/ vrrl)/ Manager Remuneration payable to other directors Remuneration payable to MD/ Manager Remuneration payable to other directors Board Resolution (if within the prescribed limits) i.e. up to 1%, 10%, 3% as the case may be; Special Resolution + Prior approval of Banks Public Financial Institutions, Non-convertible Debenture holders or secured creditors (applicable in case of defaulting companies) (if exceeding the prescribed limits)
  22. Sec 153 Application for allotment of Director Identification Number ' In section 153 of the principal Act, the following proviso shall be inserted, namely: "Provided that the Central Government may prescribe ANY IDENTIFICATION NUMBER which shall be treated as Director Identification Number for the purposes of this Act and in case any individual holds or acquires such identification number, the requirement of this section shall not apply or apply in such manner as may be prescribed.' The Proposed amendment provides that the Central Government may provide an Identification Number to an Individual for being appointed as the Director of a company which shall be treated equally as DIN and the requirement shall be deemed to be complied with.
  23. Sec 165(1) Number of Directorship The following Explanation shall be inserted, namely: — 'Explanation Il—For reckoning the limit of directorships of twenty companies, the directorship in a Dormant Company shall not be included," Analysis:- So counting the number of directorship for total directorships is now clarified,
  24. Sec 167(1) Vacation of office of director In section 167 of the principal Act, in sub-section (1), (i) in clause (a), the following proviso shall be inserted, namely:— "Provided that where he incurs disqualification under sub-section (2) of section 164, the office of the director shall become vacant in all the companies, other than the company which is in default under that sub- section.' (ii) in clause (D, for the proviso the following proviso shall be substituted, namely, — "Provided that the office shall not be vacated by the director in case of orders referred to in clauses (e) and (f)— (i) for thirty days from the date of conviction or order of disqualification; (ii) where an appeal or petition is preferred within thirty days as aforesaid against the conviction resulting in sentence or order, until expiry of seven days from the date on which such appeal or petition is disposed of; or (iii) where any further appeal or petition is preferred against order or sentence within seven days, until such further appeal or petition is disposed of." Analysis: This has a big impact since the director will cease his directorship in all other companies, Perhaps the Government feels that this is a bigger deterrent and have the directors be more serious of compliances in all the companies in which he is a director.
  25. Sec 168(1) Resignation of director In section 168 of the principal Act, in sub-section (1), in the proviso, for the words, "director shall also forward", the words, "director also may forward" shall be substituted. Analysis: The Bill makes it optional to file form DIR-II by director upon resignation.
  26. Sec 173(2) Meeting of Board ' In section 173 of the principal Act, in sub-section (2), after the first proviso, the following proviso shall be inserted, namely: ' "Provided further that WHERE THERE IS QUORUM IN A MEETING THROUGH PHYSICAL PRESENCE any other director may participate OF DIRECTORS, through video conferencing or other audio visual means in such meeting on specified ANY MATTER under the first proviso.' ' Analysis:- As per the proposed amendment in case there is a required quorum present on a Board Meeting then any other director may participate in the meeting through audio video mode on any matter even if it's a restricted matter as per Central Government.
  27. Sec 180 Restrictions on powers of Board In section 180 of the principal Act, in sub-section (1), in item (c), for the words "paid-up share capital and free reserves", the words ' paid-up share capital, free reserves and securities premium" shall be substituted. Analysis:- For the purpose of determining the requirement for a company to take consent by members in SR for borrowing money after a certain limit which includes as per the current provision:" Aggregate of Paid up Share capital and IS now proposed to include Free reserves, SECURITIES PREMIUM
  28. Sec 185 Loan to Director (Complete Section is Proposed to be substituted) The entire section has been rewritten in the Bill ' Analysis:- The proposal allows companies to advance loan to any other person where the director is interested, subject to prior approval of the company by a special resolution. Also, proposes that the loans extended to persons, including subsidiaries, falling within the restrictive purview of Section 185 should be used by the subsidiary for its principal business activity only, and not for further investment or grant of loan.
  29. Thank You!!!

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