Major Changes in Company Amendment Bill, 2017
Introduction: The Company amendment bill is passed by Rajya Sabha on December 19, 2017 and by Lok Sabha on July 27, 2017, which shall come into force on getting the President Assent:
Highlights of Companies (Amendment) Bill, 2017 are given hereunder:
§ Name Reservation: In case of incorporation, name reserved by the Registrar of Companies (ROC) shall be valid for 20 days from the date of approval instead of 60 days from the date of application.
§ Registered Address of the Company: It is proposed that Company shall within 30 of its incorporation have registered office instead of current requirement to have registered office on or from 15th day of its incorporation.
It is proposed that notice of every change of the situation of the registered office, shall be given to the registrar within 30 days instead of 15 days.
§ Section 134-Signing of Financial Statement, Board’s Report: Before amendment, provisions of section 134 required that, the financial statement shall be signed by Chief Executive Officer, if he is a director in the Company. The amendment provides that the Chief Executive Officer shall sign the financial statements irrespective of the fact whether he is a director or not because Chief executive officer is a Key Managerial Personnel and is responsible for the overall management of the Company.
§ Ratification of Auditor- It is proposed to omit the requirement related to ratification of appointment of auditors by members at every annual general meeting.
§ Self-Declaration to replace Affidavit: With reference to incorporation of a Company, “Affidavit” has been replaced by “Self-Declaration” from the first subscribers to memorandum and first directors. This will ease the additional documentary burden and avoid delay in the incorporation process.
§ General Meeting: The wholly owned subsidiary of Foreign Company is now allowed to hold Extra Ordinary General Meeting outside India.
It is also proposed to allow the unlisted company to hold its AGM anywhere in India if consented by all members in writing or in electronic mode. It will save the time of many companies.
§ Managerial Remuneration: The requirement of approval of the Central Government for managerial remuneration above the prescribed limit (11%) are replaced by approval through special resolution by shareholders in general meeting.
§ Private Placement:
a) The Private Placement process is simplified by doing away with separate offer letter details to be kept by Company and reducing the number of filings.
b) Change in Private Placement definition and proposed to cover all securities offer and invitations other than right.
c) Condensed format of Offer Letter and Application form likely to be introduced.
d) Company would be allowed to make offer of multiple security simultaneously.
e) Money received under private placement shall not be utilised unless the return of allotment is filed with the ROC.
f) The penalty provisions for raising of capital are proposed to be rationalized by linking it to the amount involved in the issue.
g) Period of filing return of return of allotment is proposed to be reduced to 15 days instead of 30 days (current).
§ Authentication of documents, proceedings and contracts (Sec 21): It is proposed that apart from Key Managerial Personnel and Officer of the Company, an employee can also be authorized to authenticate the documents on behalf of the Company.
§ Net worth (Section 2(57)): It is proposed to include the debit and credit balance of Profit and loss account in calculation of Net Worth.
§ DIR-11: Requirement of filing DIR-11 (filing of copy of resignation to ROC by director itself) made optional.
§ CSR: Eligibility for doing CSR to be determined based on preceding “Financial year” instead of “any financial year”.
It is proposed that Section 135 allow composition of CSR Committee with two or more directors in case the company is not required to appoint independent director.
§ Additional Fees and Penalty: In case of delay of filing document, fact or information required to be submitted under section 92 or section 137, after the expiry of prescribed period instead of slab wise additional fees, a flat additional fees may be prescribed which shall not be less than INR 100 per day is required to be paid. Different amount can be prescribed for different class of Companies.
It is proposed that penal provisions for small companies and one person Company is to be reduced.
§ Section 185 Loan to directors etc.: To address the difficulties being faced in genuine transactions, the companies are permitted to give loans to entities in which directors are interested after passing special resolution. This would give big relief to Companies.
§ Definition of Associate Company: Substitute the explanation of term significant influence under the definition of associate company, control of 20% of the voting power or control or participation in business under the agreement instead of 20% of total share capital.
§ Restriction on powers of Board: It is proposed to include securities premium along with paid up capital and free reserves for calculation of maximum limits on borrowing powers of the Board.
§ Vacation of Office of director: It is proposed that in case a director incurs any of disqualifications under 164(2) due to default of filing of financial statements or annual return or repayment of deposits or pay interest or redemption of debentures or payment of dividend, he shall vacate office in all the companies other than the company in is default.
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