The Companies Act (Amendment) Bill, 2016 is approved by Lok Sabha, which was introduced in March last year. The same will now be referred to Rajya Sabha for consideration and passing.
The Bill thrives on executing significant changes in the nascent Act, The Companies Act,2013 to eliminate complexities and facilitate ease of doing business.
Furthermore, the urge to curb various scams like PACL and National Spot Exchange Ltd scams became the foundation. The Bill focused on strengthening the corporate governance standards and prescribed strict action against the defaulters.
The minister of state for Finance and Corporate Affairs, Arjun Ram Meghwal, streamed the bill with voice votes, having over 40 amendments to the provisions of the Companies Act,2013.
# What Initiated the Amendment
After the detailed discussions, it was revealed that apart from, the ease of doing business and to create strict adherence towards law, there were are certainly other factors also,
Many Sections of the Companies Act,2013 were not yet Notified: It not only creates ambiguity but many implementation issues in the compliance procedure.
Lack of Clarity: There are several aspects of the act, which has been left to the delegated legislation.
# Certain Salient Features of the Amendment Bill
There are about 40 amendments in the Companies Act, 2013. A few key provisions are:
Simplification of Private Placement Process: Under section 42 of the Companies Act,2013, the law currently prohibits an issue of securities if the earlier one is pending. The Bill would simplify the process by authorizing the companies to offer different kinds of securities by keeping more than one such issue open.
Removal of Bar: The Restriction on layers of subsidiary and investment companies which is currently restricted to two would get removed in the bill.
Unrestricted Object Clause: The companies will no longer have to mention specific objects in the Object Clause of the Memorandum Of Association, which would bring operational freedom in the companies.
Moreover, the self-declarations will replace affidavits from subscribers to the memorandum and first directors.
No Central Government’s Approval: Under section 197(1) of the Companies Act,2013 regarding the managerial remuneration, which when crosses the prescribed thresholds had to seek approval from central Government. The Bill replaced such approvals with passing a Special Resolution for approval from shareholders.
Removal of certain Provisions: Provisions for Insider Trading and Forward dealing have been removed. The rationale behind this omission is that such provisions apply to listed entities which are covered under SEBI regulations.
Compounding of Offenses: All kinds of frauds amounting to less than Ten lakhs would be eligible to compounding.
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