|The Companies (Amendment) Bill, 2015 - Proposed changes|
|The Companies (Amendment) Bill, 2015 is on the anvil of becoming a reality now. This will reduce many procedural requirements. All proposals seem to be favourable keeping into view ease of doing business initiative of the NDA Govt to attract investment.
Please find snapshot of analysis of operative sections for your ready reference.
|sec 2(68)||Definition of Private Company||the words "of one lakh rupees or such higher paid-up share capital" shall be omitted||Now, companies can be incorporated with any capital. No minimum capital funda.|
|sec 2(71)||Definition of Public company||in sub-clause (b), the words "of five lakh rupees or such higher paid-up capital," shall be omitted|
|Sec 9||Common seal||the words "and a common seal" shall be omitted||The companies do not require to have common seal. It will ease execution of documents. Wherever common seal is required to be affixed such as the bills of exchange, share certificate, etc., the same can be effected either by sign of 2 Directors or by one director & CS in place of common seal.|
|sec 12(3)(b)||Common seal||substituted to the effect : "(b) have its name engraved in legible characters on its seal, if any|
|sec 22||Bills of Exchange, etc.||substituted to the effect : the words "issued under the common seal, if any, of the company or signed by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary"|
|sec 46 (1)||Share Certificate||substituted to the effect : the words "issued under the common seal, if any, of the company or signed by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary"|
|Sec 11||Certificate for Commencement of Business||ommitted||The companies don't require to file declaration for receipt of subscription money, etc. The borrowing power can be exercised immediately after incorporation.|
|Sec 76A||Punishment for default in repayment of deposits||When company fails to repay deposits raised u/s 73 or 76 or any interest thereon or raises deposit in contravention of sec 73 & 76 provisions, such companies shall be punishable with fine of Rs. 1 crores - Rs. 10 crores and every such officer is punishable with imprisonment upto 7 years or fine of Rs. 25 lacs - Rs. 2 crores or both.
It has further ben provided that if such officer has contravened the provisions knowingly or willfully with the intention to decieve the public, then in adition to above, he is liable to be punishable u/s 447 i.e. fraud.
|Newly inserted. Sec 75 provided for punishment for default in interest or principal payment but it was made applicable to only deposits which were raised before commencement of the CA, 2013 and therefore, to provide for penalty when there is default in connection with deposits raised after CA, 2013, the same is inserted.
Very harsh provision.
|Sec 117 (3)(g)||Board resolutions to be filed with the ROC u/s 179||The Board resolutions passed u/s 179 can't be inspected nor copies can be obtained from ROC||Wel come provision. The resolutions filed u/s 179 with MCA can't be inspected or asked for copies by public.
This was basically to address the apprehension of companies that the rivals will have access to almost all major decisions taken at the board which are privy to the Board members only.
The MCA may device the form accordingly.
|Sec 123||Declaration of dividend||Proviso is added to the effect that no company shall declare any dividend unless c/s losses and depreciation not provided are set off against current year profits.||Now, dividend can't be declared even out of free reserves of previous years unless all c/f losses and depreciation not provided are set off.|
|Sec 134(3)(ca) & Sec 143(12)||Fraud reporting by the auditors & disclosure in the Board report||The frauds which are reported by the auditors to the Audit Committee / Board but not required to be reported to the CG (due to the amount or other criteria as may be prescribed by the CG in Rules) are required to be mentioned in the Board report.||Welcome provision. In CA, 2013, there was no limit for reporting to CG. All such cases involving fraud were supposed to be reported to CG by the Auditors. By precribing some criteria vide Rules, such cases of reporting to CG will be reduced. For such cases, reporting to Board / Audit Committee will be sufficient and such details would be required to be provided in the Board Report.|
|Sec 177 (4)(iv)||Omnibus approval by Audit Committee for Related Party Transactions||Following is inserted as Proviso: The Audit Committee may make omnibus approval for related party transactions proposed to be entered into by the company subject to such conditions as may be prescribed||Welcome step. Present CA, 2013 requires approval of audit committee for RPTs. This creates hasseles as each RPT is supposed to be placed before the Audit Committee for its approval.
Now, the audit committees can provide omnibus approval for such RPTs subject to following the rules to be prescribed.
We can consider to pass omnibus resolutions in companies in order to avoid audit committee meetings for such purpose only. However, we need to wait till the time rules are not prescribed for such approval.
|Sec 185||Loans to directors, etc.||Proviso to sub-section 1 added to provide exemption from applicability of the section to (a) any loans, guarantee or security made by holdco to its WOS and (b) any guarantee or security given by holdco in respect of loan made by bank or FI to subsidiary companies provided such loans as mentioned in (a) & (b) are utilized for principal business of the sub co.||There is no change in position. It is exempted through Rules presently. Now the same is exempted through adding proviso to the main section in the Act itself.|
|Sec 188||Special Resolution for RPTs falling under sec 188(1)||The word 'special resolution' is replaced with the word 'resolution' in entire section||Welcome step as now RPT can be approved by an Ordinary resolution paased by non-related shareholders.|
|Sec 188||Special Resolution for RPTs falling under sec 188(1)||No approval of non-related shareholders is required if the transaction is between holdco and WOS as the same will be reflected into consolidated accounts and therefore, to be approved by holdco shareholders.||Welcome step as it will exempt related party transactions between holding companies and wholly owned subsidiaries (WOS) from the requirement of approval of non-related shareholders|
Tags Corporate Law