Top 100 Amendments
Companies Act’2013 has been the key point of discussion in the field of law in the recent times and has successfully become a flora of the immense corporate world. In spite of the ongoing debate about few of its provisions being contradictory with the other existing rules and regulations across India, this law is heading towards gaining acceptability throughout.
This article intends to throw some light upon the Top 100 amendments brought in by this act for the benefit of our profession. The amendments have been segregated below as per their relevant Section in the said act.
Amendment 1: Section 2 (68)
The private companies incorporated in India could have up to 50 members as per the erstwhile Companies Act’1956. However, the new act has raised this bar from 50 members to 200 members and has incorporated this change in the definition of a Private Company under the said section. This shall increase the growth opportunities for the private companies and expand their shareholder base.
Amendment 2: Section 3 [Formation of Company read with Rule No. 3(1)]
A new concept of One Person Company (OPC) has also been introduced which shall be a private company. A natural person who is a citizen of India and a resident in India (in the year of formation of the company) is eligible to incorporate such a company by subscribing his name to a memorandum and complying with all the requirements of the Act.
This concept has opened new doors for individuals who are interested in going for a corporate set up from a sole-proprietorship model. Also, by giving such an option to only natural persons (this implies companies are not eligible) has also curbed the possibility of utilizing this structure for tax evading schemes.
Amendment 3: Section 3 [Formation of Company read with Rule No. 3(2)]
In order to protect the interest of the government tax laws, the above mentioned One Person Company can be opened by only one time per natural person. This implies that a single person shall not be eligible to incorporate more than one OPC or even become a nominee in more than one OPC.
Amendment 4: Section 3 [Formation of Company read with Rule No. 6(1)]
Along with providing an avenue for growth for individual business owners by giving them an option for OPC, the interest of small business owners has also been protected. Therefore, upper turnover limits have been defined for an OPC.
The point in time where such a company exceeds a paid up capital of 50 lakhs or an average annual turnover during the said period by more than Rs. Two Crore, it shall cease to exist as an OPC.
Also, as per Section 3 [Formation of Company read with Rule No. 6(6)], a provision has been provided that in case the above circumstances exist, an OPC can get itself converted into a private or a public company after meeting the minimum requirement with respect to numbers of directors and members.
Amendment 5: Section 4 [Memorandum read with Rule Number 8 (3)]
In order to ensure that a name of a company reflects on its activities undertaken, it has been provided that wherever a company changes its activities which are not reflected in the name of the company, the name of the company has to be changed to reflect its new activities as well. This change has to be given effect within six months from the change of such activities.
Amendment 6: Section 4 [Memorandum]
The Memorandum also states that the Objects Section in the Memorandum of Association is no longer required to be segregated into the Main, Ancillary and Other Objects. Also, the company shall not be permitted to provide for other Objects as well.
Amendment 7: Section 5 [Articles]
The act has brought about a flexibility in provisions of the Articles of Association. The AOA of a company are now permitted to contain provisions with respect to entrenchment whereby the specified provisions of the AOA can be altered only in case the conditions or procedures which are more restrictive than those which are applicable in case of special resolution are met.
Amendment 8: Section 11 [Commencement of Business read with Rule No. 24]
There has been an addition in the document submission requirements [to be filed with ROC] at the time of commencement of business. This amendment to both public as well as private companies. The additional documents are:-
a. A declaration by a director in a prescribed form stating that the subscribers to the memorandum have paid the value of shares agreed to be taken up by them;
b. A confirmation that the company has filed a verification of its registered office with the Registrar;
c. In case a company which requires registration from the sectorial regulators like RBI, SEBI, etc. such an approval shall be required.
Amendment 9: Section 13 [Alteration of Memorandum Read with Rule No. 32]
This section is for companies which raise money through going public via a prospectus and have some unutilized amount from the raised money. The section specifies that such companies shall not change its objects unless a special resolution is passed through postal ballot and the dissenting members have been given an exit option by the Promoters [SEBI Regulation].
The rules further provide for certain disclosures which issuing the notice for a general meeting. Such disclosures include justification for the alteration or any change in the object, cash flow of the company etc.
Amendment 10: Section 2(42) [Foreign Company Rule 2 (h)]
The definition of a Foreign Company has been altered and a phrase “electronic mode” has been incorporated. This shall include all such business activities which are carried electronically through a mobile device, website, email, social media, cloud computing etc. The business activity shall be included even in case the main server of such a business is not installed in India.
The next 10 Amendments shall follow…