HIGHLIGHTS OF KEYAMENDMENTS OF …factumlegal.com/images/Highlights-of-Key-Companies...Highlights of...

Passed By Lok Sabha : 27th July, 2017 President Assent Pending Passed By Rajya Sabha : 19th December, 2017 Notification by Central Government Pending

Highlights of Key Amendments of

Companies (Amendment) Bill, 2017

Amendment Bill, 2017

HIGHLIGHTS OF KEYAMENDMENTS OF

COMPANIES (AMENDMENT) BILL 2017




Amendment Bill, 2017 Sr

.

N

o.

Sectio

n/Rule

No.

Companies Act, 2013

(1)

Companies Amendment Bill,

2017

(2)

Difference

between (1) and

(2)

Impact

1. 3A If at any time the number of

members of a company is

reduced, in the case of a public

company, below seven, in the

case of a private company,

below two, and the company

carries on business for more

than six months while the

number of members is so

reduced, every person who is a

member of the company during

the time that it so carries on

business after those six months

and is cognisant of the fact that

it is carrying on business with

less than seven members or two

members, as the case may be,

shall be severally liable for the

payment of the whole debts of

the company contracted

during that time, and may be

severally sued therefor

This section is

inserted for the

very first time

New provision is same as section 45

of the Companies Act 1956, which

was not part of new Companies Act

2013.

It makes members knowing that

number of members of a company is

below minimum required and the

company carries on business for

more than six months, then such

members are personally liable for the

debt contracted during such period.

2. 4(5) ii) Upon receipts of

application, the registrar

may on the basis of

information and documents

furnished along with the

application reserve the name

for a period of 60 days from

the date of the application.

Upon receipts of application, the

registrar may on the basis of

information and documents

furnished along with the

application reserve the name for

a period of 20 days from the date

of the approval or such other

period as may be prescribed.

Under Section 4(5)

the words "sixty

days from the date

of the

application" are

substituted

"twenty days from

the date of

approval or such

other period as

may be

prescribed".

Before the proposed amendment the

name is reserved by the Registrar for

the period of 60 days from the date

of application. But due to the

amendment the name shall be

reserved for 20 days from the date of

approval.

3. 12(1) A company shall on and

from the fifteenth day of

its incorporation and all

times thereafter have a

registered office capable of

receiving and

acknowledging all

communications and notices

as may be addressed to it.

A Company shall within thirty

days of its incorporation and

all times thereafter have a

registered office capable of

receiving and acknowledging all

communications and notices as

may be addressed to it

Under section 12(1)

the words “on and

from the fifteenth

day of its

incorporation" are

substituted by

“within thirty

days of its

incorporation"

Before commencement of this

amendment every company shall

have a registered office within a

period of 15 days from the date of its

incorporation. But due to these

amendments every company shall

have a registered office within a

period of 30days from the date of its

incorporation. Now Company has 15

days extra time “to have a registered

office” from the date of its

incorporation

4. 12(4) Notice of every change of

the situation of the

registered office, verified in

a manner prescribed, after

the date of incorporation of

the company, shall be given

to the Registrar within

fifteen days of the change,

who shall record the same

Notice of every change of the

situation of the registered office,

verified in a manner prescribed,

after the date of incorporation of

the company, shall be given to

the Registrar within thirty

days of the change, who shall

record the same

Under section 12(4)

the words "within

fifteen days", are

substituted "within

thirty days"

After the Commencements of these

amendments now every Company

shall give notice of any changes in

the situation of the registered office

to the register within period of

30days from the date of such

changes.

Due to such Amendment now

Company has extra time of 15 days

to give a notice and prepare relevant




Amendment Bill, 2017 documents in relation to changes of

situation of the registered office of

the company to the Register.

5 42 42. (1) A company may, subject

to the provisions of this section,

make a private placement of

securities.

(2) A private placement shall be

made only to a select group of

persons who have been

identified by the Board

(herein referred to as

"identified persons"), whose

number shall not exceed fifty

or such higher number as may

be prescribed [excluding

the qualified institutional buyers

and employees of the company

being offered securities

under a scheme of employees

stock option in terms of

provisions of clause (b) of

subsection (1) of section 62], in

a financial year subject to such

conditions as may be

Prescribed.

(3) A company making private

placement shall issue private

placement offer

and application in such form and

manner as may be prescribed to

identified persons,

whose names and addresses are

recorded by the company in

such manner as may be

prescribed:

Provided that the private

placement offer and

application shall not carry any

right of renunciation.

Explanation I.—"private

placement" means any offer or

invitation to subscribe

or issue of securities to a select

group of persons by a company

(other than by way of

public offer) through private

placement offer-cum-

application, which satisfies the

conditions specified in this

section. Explanation II.—

"qualified institutional buyer"

means the qualified institutional

buyer as defined in the

Securities and Exchange Board

of India (Issue of Capital and

Section 42 is

substituted by the

new section as

mention in the

second column.

The changes brought about in

the provisions relating to private

placement are as follows and every

company required to follow such

condition for issue of securities

throught private placement:-

The board of directors are to

identify the select group of persons

to whom the private placement is

to be made.

The format of application form

shall be prescribed.

The private placement offer letter

and application form shall not

carry any right of renunciation.

The company is not to utilise the

money raised through private

placement unless allotment has

been made and return of

allotment has been filed with the

Registrar.

The return of allotment is required

to be filed within 15 days of

allotment.

In case the company defaults in

filing the return of allotment

within the time

period prescribed

above, the company, its promoters,

and directors shall be liable to

a penalty for each default of

one

thousand rupees for each day

during which such default

continues but not exceeding

twenty five lakh rupees.

The requirement of filing the

record of private placement with

the Registrar within a period of

thirty days of circulation of private

placement offer letter has been

omitted.

Further, if the company makes an

offer or accepts monies in

contravention of this section, the

company, its promoters and

directors shall be liable for a

penalty which may extend to the

amount raised through private

placement or two crore rupees

whichever is lower (earlier it was

whichever is higher), and the

company shall also refund the

monies that with interest specified




Amendment Bill, 2017 Disclosure Requirements)

Regulations, 2009, as amended

from time to time, made

under the Securities and

Exchange Board of India Act,

1992.

Explanation III.—If a company,

listed or unlisted, makes an offer

to allot or

invites subscription, or allots, or

enters into an agreement to allot,

securities to more

than the prescribed number of

persons, whether the payment

for the securities has

been received or not or whether

the company intends to list its

securities or not on any

recognised stock exchange in or

outside India, the same shall be

deemed to be an offer

to the public and shall

accordingly be governed by the

provisions of Part I of this

Chapter.

(4) Every identified person

willing to subscribe to the

private placement issue

shall apply in the private

placement and application

issued to such person alongwith

subscription money paid either

by cheque or demand draft or

other banking channel

and not by cash:

Provided that a company shall

not utilise monies raised

through private placement

unless allotment is made and

the return of allotment is filed

with the Registrar in

accordance with sub-section (8).

(5) No fresh offer or invitation

under this section shall be made

unless the

allotments with respect to any

offer or invitation made earlier

have been completed or

that offer or invitation has been

withdrawn or abandoned by the

company:

Provided that, subject to the

maximum number of identified

persons under subsection

(2), a company may, at any time,

make more than one issue of

securities to such

in sub-section (6) to subscribers

within a period of thirty days of

the order imposing penalty.




Amendment Bill, 2017 class of identified persons as

may be prescribed.

(6) A company making an offer

or invitation under this section

shall allot its

securities within sixty days

from the date of receipt of the

application money for such securities and if the company is

not able to allot the securities

within that period, it

shall repay the application

money to the subscribers within

fifteen days from the

expiry of sixty days and if the

company fails to repay the

application money within the

aforesaid period, it shall be

liable to repay that money with

interest at the rate of twelve

per cent. per annum from the

expiry of the sixtieth day:

Provided that monies received

on application under this section

shall be kept in

a separate bank account in a

scheduled bank and shall not

be utilised for any purpose

other than—

(a) for adjustment against

allotment of securities; or

(b) for the repayment of monies

where the company is unable to

allot securities.

(7) No company issuing

securities under this section

shall release any public

advertisement or utilize any

media, marketing or distribution

channels or agents to inform the

public at large about such an

issue.

(8) A company making any

allotment of securities under this

section, shall file

with the Registrar a return of

allotment within fifteen days

from the date of the allotment in such manner as may be

prescribed, including a complete

list of all allottees, with

their full names, addresses,

number of securities allotted and

such other relevant

information as may be

prescribed.




Amendment Bill, 2017 (9) If a company defaults in

filing the return of allotment

within the period

prescribed under sub-section

(8), the company, its promoters

and directors shall be

liable to a penalty for each

default of one thousand rupees

for each day during which

such default continues but not

exceeding twenty-five lakh

rupees.

(10) Subject to sub-section (11),

if a company makes an offer or

accepts monies in contravention

of this section, the company, its

promoters and directors shall be

liable for a penalty which may

extend to the amount raised

through the private placement

or two crore rupees, whichever

is lower, and the company shall

also refund all

monies with interest as specified

in sub-section (6) to subscribers

within a period of

thirty days of the order imposing

the penalty.

(11) Notwithstanding anything

contained in sub-section (9) and

sub-section (10), any private

placement issue not made in

compliance of the provisions of

the subsection (2) shall be

deemed to be a public offer and

all the provisions of this Act and

the Securities Contracts

(Regulation) Act, 1956 and

Securities and Exchange Board

of

India Act, 1992 shall be

applicable.

6 53 Any share issued by a

Company at a discounted

price shall be void.

Any share issued by a Company

at a discount price shall be void

Under section 53(2)

the word

“discounted price

are substituted by

“discount price”.

As proposed amendment clear the

ambiguity in relation to

interpretation of word discounted

price.

However, the interpretation of word

discounted price may mean a price

lower than the market value of shares

and not lower than its nominal

value.so the proposed amendment

replace the discounted price to

discount price as to remove

ambiguity.




Amendment Bill, 2017 7 62(2) The notice referred to in

sub-clause (i) of clause (a)

of sub-section(1) shall be

dispatched through

registered post or speed post

or through electronic mode

to all the existing

shareholders at least three

days before the opening of

the issue.".

The notice referred to in sub-

clause (i) of clause (a) of sub-

section

(1) shall be dispatched through

registered post or speed post or

through electronic

mode or courier or any other

mode having proof of delivery to all the existing

Shareholders at least three days

before the opening of the issue".

Under Section

62(2), the following

words are inserted

“or courier or any

other mode having

proof of delivery”.

Before proposed amendment every

Company who issued share under

section 62 as right issue shall give a

notice to the shareholder through

registered post or speed post or

through electronic mode only. But

due to Companies amendment bill

company can dispatched a notice

through registered post or speed post

or through electronic mode or

courier or any other mode having

proof of delivery to the existing

shareholder. Hence, now company

has many option to dispatch a notice

to shareholder

8. 73(2)(c

)

depositing such sum which

shall not be less than fifteen

per cent of the amount of its

deposits maturing during a

financial year and the

financial year next

following, and kept in a

scheduled bank in a separate

bank account to be called as

deposit repayment reserve

account

Depositing, on or before the

30th day of April each year,

such sum which shall not be less

than twenty per cent. of the

amount of its deposits

maturing during the following

financial year and kept in a

scheduled bank in a

separate bank account to be

called deposit repayment

reserve account;"

Under section

73(2), for clause (c)

are substituted.

As company were depositing a sum

of 15% of the amount of its deposits

maturing during the financial year or

next financial year in the schedule

bank.

And there was no time limit for

deposit of such sum in the bank

account.

Even though the act gives a time

limit i.e. before the 30th day of

April each year for depositing a

such sum in the scheduled bank and

there is one relaxation given by the

companies amendment bill through

which company shall deposit 20% of

the amount of its deposits maturing

during a financial year only not for a

next financial year.

Now every company who accept

deposit under Chapter V, the

Companies ( Acceptances of

deposit) Rules, 2014 shall deposit

20% of amount of deposit maturing

during the financial year rather to

calculate and deposit 15% of amount

of deposit maturing during a

financial year and the next financial

year.

9. 73(2)(e

)

certifying that the company

has not committed any

default in the repayment of

deposits accepted either

before or after the

commencement of this Act

or payment of interest on

such deposits

certifying that the company has

not committed any default in the

repayment of deposits accepted

either before or after the

commencement of this Act or

payment of interest on such

deposits and where a default

had occurred, the company

made good the

default and a period of five

years had lapsed since the date

of making good the default;

Under section

73(2)(e) the

following words

“on such deposit”

are substituted by

“on such deposits

and where a

default had

occurred, the

company made

good the

Default and a

period of five

years had lapsed

since the date of

making good the

default”.

In case company made default in the

repayment of deposit or interest

thereof on such companies were

ineligible to accept deposit from its

members under chapter V of the

companies( Acceptance and deposit

) Rules 2014 But after

Commencement of companies

amendment bill Companies can

accept the deposit from the member

even in case of default made by the

company provided that company

shall comply below mention

condition:

a)the company had made the default

good and




Amendment Bill, 2017 b) period of 5 year had been lapsed

from the date of making good the

default.

so there is relaxation for those

company who had made default in

the repayment of deposit or interest

thereof by complying two condition

as mentioned above.

10

.

78 Where a company fails to

register the charge within

the period specified in

section 77, without

prejudice to its liability in

respect of any offence under

this Chapter, the person in

whose favour the charge is

created may apply to the

Registrar for registration of

the charge along with the

instrument created for the

charge, within such time

and in such form and

manner as may be

prescribed and the Registrar

may, on such application,

within a period of fourteen

days after giving notice to

the company, unless the

company itself registers the

charge or shows sufficient

cause why such charge

should not be registered,

allow such registration on

payment of such fees, as

may be prescribed

Where a company fails to

register the charge within the

period of thirty

days referred to in sub-section

(1) of section 77, without

prejudice to its liability in

respect of any offence under this

Chapter, the person in whose

favour the charge is created may

apply to the Registrar for

registration of the charge along

with the instrument created for

the charge, within such time and

in such form and manner as may

be prescribed and the Registrar

may, on such application, within

a period of fourteen days after

giving notice to the company,

unless the company itself

registers the charge or shows

sufficient cause why such

charge should not be registered,

allow such registration on

payment of such fees, as may be

prescribed

Under section 78

the following

words “register the

charge within the

period specified in

section 77” are

substituted by

“register the

charge within the

period of thirty

days referred to in

sub-section (1) of

section 77”.

In the companies act. 2013, there is

ambiguity in the provisions of

section 78 w.r.t. filling of application

for registration of charge by charge

holder i.e. “and the provision sub-

section (1) of section 77 shall, as far

as may be, apply to an intimation

given under this section”

As proposed amendment make it

clear the interpretation of “register

the charge within the period

specified in section 77” and

substituted them by “register the

charge within the period of thirty

days referred to in sub-section (1)

of section 77”.

11

.

82(1) A company shall give

intimation to the Registrar

in the prescribed form, of

the payment or satisfaction

in full of any charge

registered under this

Chapter within a period of

thirty days from the date of

such payment or satisfaction

and the provisions of sub-

section (1) of section 77

shall, as far as may be,

apply to an intimation

given under this section.

A company shall give intimation

to the Registrar in the prescribed

form, of the payment or

satisfaction in full of any charge

registered under this Chapter

within a period of thirty days

from the date of such payment

or satisfaction.

"Provided that the Registrar

may, on an application by the

company or the

charge holder, allow such

intimation of payment or

satisfaction to be made

within a period of three

hundred days of such payment

or satisfaction on payment of

Under section 82

the following

words “and the

provisions of sub-

section (1) of

section 77 shall, as

far as may be,

apply to an

intimation given

under this section”

are totally omitted.

This proviso is

insert for the very

first time

In the Companies Act, 2013, there is

ambiguity in the provisions of

section 82(1) i.e. “and the provision

sub-section (1) of section 77 shall, as

far as may be, apply to an intimation

given under this section”

But proposed amendment clear the

interpretation of section 82(1) and

omitted following words ”and the

provisions of sub-section (1) of

section 77 shall, as far as may be,

apply to an intimation given under

this section”

And laid down the interpretation by

inserting a proviso under section

82(1) and make it clear that in case




Amendment Bill, 2017 such additional fees as may be

prescribed.".

application by the company or the

charge holder, allow such intimation

of payment or satisfaction within a

period of 300 days of such payment

or satisfaction on payment of such

additional fees as may be prescribed.

Now Every company shall initimate

to the Registrar within 30 days from

the date of such payment or

satisfaction or if any application

made by the company then within

300 days.

12

.

89 "(10) For the purposes of this

section and section 90,

beneficial interest in a

share includes, directly or

indirectly, through any contract,

arrangement or otherwise, the

right or entitlement of a person

alone or together with any other

person to—

(i) exercise or cause to be

exercised any or all of the

rights attached to such

share; or

(ii) receive or participate in any

dividend or other distribution in

respect of such share.

This sub-section

has been inserted

after subsection (9).

Earlier there was no definition of

Beneficial interest under the

Companies Act, 2013 but now a new

sub section has been inserted after

sub section (9) which has widen the

scope of beneficial interest which

includes right and entitlement of a

person alone or together with any

other person to exercise rights

attached to such share or receive or

participate in any dividend or

distribution in respect of such share.

90 Register of significant

Beneficial owners in a

company

Existing sec 90, which gives

powers to central government

to investigate the actual

beneficial ownerships in the

company is being proposed to

be replaced by Bill 2017

The committee recommended that

companies and individuals may be

obligated to obtain information on

beneficial ownership from each

shareholder holding more then 25%

shares or as prescribed.

So companies are empowered to

seek information form its members

and in case of failure to supply

information, apply sanctions in the

form of suspension of rights against

beneficial interest, approach to

Tribunal to seek appropriate orders.

The companies are also mandated to

maintain register of beneficial

owners and provide requisite

information to MCA.

13 92(3) An extract of the annual

return in such form as may

be prescribed shall form part

of the Board‘s report

Every company shall place a

copy of the annual return on the

website of the company, if any,

and the web-link of such annual

return shall be disclosed in the

Board's report

Sub – Section (3)

totally substituted

MGT 9 i.e. extract of annual return

will no longer form part of board

report which will help in reducing

duplication of information.

Instead, company which have their

functional website have to upload

annual return on their website and

web-link of the same has to be

specified in the board report

14 93 Return to be Filed with

Registrar in Case Promoters'

Stake Changes

Omitted Omitted Relaxation for listed companies.

Section 93 requires filing of a return

by a listed company with the

Registrar, in a prescribed form with




Amendment Bill, 2017 respect to changes in the number of

shares held by promoters, and top ten

shareholders.

As the information was also required

to be filed with Stock

Exchanges/SEBI, it would lead to

duplication of reporting.

Moreover, the present scenario

required filings on changes in

individual holding, This has led to an

increase in the amount of filings

being made under the Act.

Therefore the same has been omitted

from the Act.

15 Provis

o to

96(2)

Provided that the Central

Government may exempt

any company from the

provisions of this sub-

section subject to such

conditions as it may impose

"Provided that annual general

meeting of an unlisted company

may be held at any place in

India if consent is given in

writing or by electronic mode by

all the members in advance:

Provided further that"

In the Proviso of

section 96(2) the

words ‘Provided

that’ substituted by

‘Provided that

annual general

meeting of an

unlisted company

may be held at any

place in India if

consent is given in

writing or by

electronic mode by

all the members in

advance:

Provided further

that

By obtaining 100% of approval of

shareholders in advance, private

unlisted companies, public unlisted

companies and wholly owned

subsidiaries of unlisted company can

convey their AGM at any place in

India.

Now only listed companies are

restricted w.r.t place of AGM i.e.

they still have to hold their AGM

either at the registered office of the

company or at some other place

within the city, town or village in

which the registered office of the

company is situated.

16 Inserti

on of

Provis

o to

100(1)

The Board may, whenever it

deems fit, call an

extraordinary general

meeting of the company

"Provided that an

extraordinary general

meeting of the company,

other than of the wholly

owned subsidiary of a

company incorporated

outside India, shall be held at

a place within India

Proviso inserted in

sub-section 1 of

Section 100

Companies can hold their EGM at

any place in India only.

However wholly owned subsidiary

of a company incorporated outside

India are exempted from this

requirement and they can hold their

EGM outside India also with a view

to ease of doing business

17 101 The text of first proviso to

Section 101 (1) is:

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 per cent

of the members entitled to

vote at such meeting.

The text of first proviso to

section 101 (1) after substitution

will be:

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-

(i) in the case of an annual

general meeting, by not less

than ninty-five per cent. of the

members entitled to vote

thereat; and

The proviso to

section 101 (1) has

been substituted

with two provisos

and now there are

two provisos to

section 101 (1)

Earlier any General Meeting can be

called by way of shorter notice

provided the company has taken the

consent of 95% of its members who

are entitled to vote at such meeting.

But, with the substitution of first

proviso to Section 101 (1) with the

two new provisos the provisions for

obtaining shorter notice are different

in case of Annual General Meeting

& in case of Extra-Ordinary General

Meeting.

Annual General Meeting can be

convened after giving shorter




Amendment Bill, 2017 (ii) in the case of any other

general meeting, by members

of the company—

a) holding, if the

company has a share

capital, majority in

number of members

entitled to vote and

who represent 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.

consent of 95% of members ( in

Number) entitled to vote thereat.

In case of Company having share

capital Extra- ordinary General

Meeting can be called after taking

consent from members holding:

a. Majority in Number and;

b. 95% of value of paidup

capital

18 110(1) Notwithstanding anything

contained in this Act, a

company—

(a) shall, in respect of such

items of business as the

Central Government may,

by notification, declare to be

transacted only by means of

postal ballot; and

(b) may, in respect of any

item of business, other than

ordinary business and any

business in respect of which

directors or auditors have a

right to be heard at any

meeting, transact by means

of postal ballot,

in such manner as may be

prescribed, instead of

transacting such business at

a general meeting.

"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.".

Proviso inserted in

sub-section 1 of

Section 110

With the proposed amendment

Public Listed Companies and

companies having more than 1000

members ( who are required to

provide e voting facility to its

members) does no longer

mandatorily required to transact

certain items through postal ballot.

Now these companies can transact

these business in general meeting in

which they are providing e-voting

facility.

These companies does not

mandatorily required to specifically

follow postal ballot process

specified under the Act.

19 117 (2) If a company fails to file

the resolution or the

agreement under sub-section

In sub-section (1), the words

and figures “ within the time

In sub section 2 of

section 117

minimum penalty

In case company fails to file

resolution under section117 within

the specified time limit, then




Amendment Bill, 2017 (1) before the expiry of the

period specified under

section 403 with additional

fees, the company shall be

punishable with fine which

shall not be less than five

lakh rupees but which may

extend to twenty-five lakh

rupees and every officer of

the company who is in

default, including liquidator

of the company, if any, shall

be punishable with fine

which shall not be less than

one lakh rupees but which

may extend to five lakh

rupees.

(3) The provisions of this

section shall apply to— (e)

resolutions passed by a

company according consent

to the exercise by its Board

of Directors of any of the

powers under clause (a) and

clause (c) of sub-section (1)

of section 180

(g) resolutions passed in

pursuance of sub-section (3)

of section 179 Provided that

no person shall be entitled

under section 399 to inspect

or obtain copies of such

resolutions; and

specified under section 403”

shall be omitted;

in sub-section (2),—

(a) for the words "not be less

than five lakh rupees", the

words "not be less than one

lakh rupees" shall be

substituted;

(b) for the words "one lakh

rupees", the words "fifty

thousand rupees" shall be

substituted;

(ii) in sub-section (3),—

(a) clause (e) shall be omitted;

(b) in clause (g), in the proviso,

the word “and” shall be omitted

and the following proviso shall

be inserted, namely:—

"Provided further that nothing

contained in this clause shall

apply

to a banking company in

respect of a resolution passed to

grant loans, or give guarantee

or provide security in respect of

loans under clause (f) of sub-

section (3) of section 179 in the

ordinary course of its business;

and.".

imposed on the

company and

officers of the

company including

liquidator has been

substituted.

Clause (e) of sub

section 3 of section

117 i.e. resolutions

passed by a

company according

consent to the

exercise by its

Board of Directors

of any of the

powers under

clause (a) and

clause (c) of sub-

section (1) of

section 180 has

been omitted.

In proviso in clause

(g) of sub section 3

of section 117, the

word ‘and’ has

been omitted and

A new proviso

inserted after

proviso in clause

(g) of sub section 3

of section 117

minimum penalty that has to paid by

the company is Rs. 1 lakh instead of

5 lakh and for officers it is Rs.

50,000/- instead of Rs. 1 lakh.

Omission of Clause (e) from Sub

section 3 of section 117 does not

impact the companies because it is

repetitive in nature. Under Section

180(1) special resolution has to be

passed by the shareholders of the

company and filing of special

resolution is triggered by section

117(3)(a) itself and clause(e) just

repetition of the same, therefore the

same was deleted.

Banking companies has been

exempted from filing resolutions

under clause (f) of sub-section (3) of

section 179 i.e. grant loans, or give

guarantee or provide security.

20 129(3) Where a company has one or

more subsidiaries, it shall, in

addition to financial

statements provided under

sub-section (2), prepare a

consolidated financial

statement of the company

and of all the subsidiaries in

the same form and manner as

that of its own which shall

also be laid before the annual

general meeting of the

company along with the

laying of its financial

statement under sub-section

(2):

Provided that the company

shall also attach along with

its financial statement, a

separate statement

containing the salient

features of the financial

statement of its subsidiary

or subsidiaries in such form

as may be prescribed.

Where a company has one or

more subsidiaries or associate

companies, it shall, in addition

to financial statements provided

under sub-section (2), prepare a

consolidated financial statement

of the company and of all the

subsidiaries and associate

companies in the same form and

manner as that of its own and in

accordance with applicable

accounting standards, which

shall also be laid before the

annual general meeting of the

company along with the laying

of its financial statement under

Sub-section (2).

Under section

129(3) the

following words

“associate

company” and “in

accordance of

applicable

standards” are

inserted.

Now due to proposed amendment,

every Company who has one or more

subsidiaries or associate companies

shall prepare a consolidated financial

statement of their subsidiaries

Companies and associate companies

in accordance with applicable

accounting standards.




Amendment Bill, 2017 21

.

134 a)Text of Section 134 (1):

The financial statement,

including consolidated

financial statement, if any,

shall be approved by the

Board of Directors before

they are signed on behalf of

the Board at least by the

chairperson of the company

where he is authorised by the

Board or by two directors

out of which one shall be

managing director and the

Chief Executive Officer, if he

is a director in the company,

the Chief Financial Officer

and the company secretary

of the company, wherever

they are appointed, or in the

case of a One Person

Company, only by one

director, for submission to

the auditor for his report

thereon.

b) Text of section 134 (3)

(a):

the extract of the annual

return as provided under

sub-section (3) of section 92;

c)Text of clause (p) of sub-

section (3) of Section 134:

in case of a listed company

and every other public

company having such paid-

up share capital as may be

prescribed, a statement

indicating the manner in

which formal annual

a)The text of Section 134 (1)

after substitution:

The financial statement,

including consolidated

financial statement, if any,

shall be approved by the Board

of Directors before they are

signed on behalf of the Board

by the chairperson of the

company where he is

authorised by the Board or by

two directors out of which one

shall be managing director, if

any, and the Chief Executive

Officer, the Chief Financial

Officer and the company

secretary of the company,

wherever they are appointed, or

in the case of One Person

Company, only by one director,

for submission to the auditor

for his report thereon.

b) Text of Section 134 (3)(a )

after substitution:

the web address, if any, where

annual return referred to in

sub-section (3) of section 92

has been placed

c) Text of clause (p) of sub-

section (3) of Section 134 after

substitution:

in case of a listed company and

every other public company

having such paid-up share

Sub-Section (1)

of Section 134 has

totally been

substituted

The text of

clause (a) of sub-

section (3) of

Section 134 of

Companies Act,

2013 has totally

been substituted

In clause (p) of

sub-section (3) of

Section 134 of

Companies Act,

2013, the words

annual evaluation

has been made by

the Board of its

own performance

and that of its

committees and

The Impact would be:

Now the financial statement

including consolidated financial

statement, if any of the company

shall be signed by:

a. by the Chairperson of the

Company only if authorised

by the Board or;

b. by two directors out of

which one shall be

Managing Director, if any viz. where the company has

Managing Director in the

company, otherwise by any

other two directors of the

Company; and

c. by the:

Chief Executive Officer, Chief

Financial Officer and Company

Secretary, if appointed

Now for the purpose of Signing of

financial statement of a Company the

major changes will be:

a) if the Company does not have

Managing Director, then the,

financial statements , including

consolidated financial statements

can even be signed by two other

directors of the company;

b) If the Chief Executive officer of

the Company is not a director in the

same company then also such Chief

Executive Officer of the Company is

eligible for signing the Financial

statements including consolidated

financial statements of the Company

Now a Company is not required to

provide Extract of Annual Return in

its Board Report & merely placing

the website address where the annual

return referred to in to in sub-section

(3) of section 92, will do the needful.

Now only the manner specified for

formal annual evaluation of the

performance of the Board, its

Committees and of individual

directors in form of a statement shall

be specified in the Board Report of a

listed and public listed company.




Amendment Bill, 2017 evaluation has been made

by the Board of its own

performance and that of its

committees and individual

directors

d) There is not even a single

proviso to clause (q) of sub-

section (3) of Section 134 of

the Companies Act, 2013

capital as may be prescribed, a

statement indicating the

manner in which formal

annual evaluation of the

performance of the Board, its

Committees

and of individual directors has

been made

d) The following provisos are

inserted to clause (q) of sub-

section (3) of Section 134 of

Companies Act, 2013:

Provided that where

disclosures referred to in this

sub-section

have been included in the

financial statements, such

disclosures shall be

referred to instead of being

repeated in the Board's report

Provided further that where the

policy referred to in clause (e)

or clause (o) is made available

on company's website, if any, it

shall be sufficient compliance

of the requirements under such

clauses if the salient features of

the policy and any change

therein are specified in brief in

the Board's report and the web-

address is indicated therein at

which the complete policy is

available.

individual

directors shall

stand substituted by

the words annual

evaluation of the

performance of the

Board, its

Committees

and of individual

directors has been

made

There is

insertion of two

new provisos to

clause (q) of sub-

section (3) of

Section 134 of

Companies Act,

2013

Earlier the Companies are required

to give proper disclosures of the

items as specified in sub-section (3)

of Section 134 of the Companies

Act, 2013 in the Board Report, even

if they are already Covered in the

financial statements of the Company

. However, with the insertion of first

proviso to clause (q) of Sub-section

(3) of Section 134 merely reference

of the items which are given under

Section 134(3) but the same are

specified in detail in the financial

statements, will do the needful.

This will eradicate duplication of

items in the financial statements &

the Board Report.

With the insertion of second

proviso to clause (q) of sub-section

(3) of Section 134, it has become

optional to place the following on the

website of the Company:

a)Policy on Directors’ appointment

and remuneration including criteria

for determining qualifications,

positive attributes, independence of

director and other matters as

provided under sub-section (3) of

Section 178 and

b)details about the Policy

developed and implemented by the

company on Corporate Social

Responsibility initiatives taken

during the year.

Further disclosure of salient features

of the abovementioned policies and

details of their implementation, in

the Board Report of a Company will

be sufficient for compliance of

Section 134 (3).





d) Text of sub-section (4) of

Section 134 is:

The report of the Board of

Directors to be attached to

the financial statement under

this section shall, in case of

a One Person Company,

mean a report containing

explanations or comments by

the Board on every

qualification, reservation or

adverse remark or

disclaimer made by the

auditor in his report

d)Text of Section newly inserted

sub-section (3A) after sub-

section (3) and before sub-

section (4) of Section 134:

The Central Government may

prescribe an abridged Board's

report, for the purpose of

compliance with this section by

a One Person Company or

small company

There is insertion

of new sub-section

viz. sub-section

(3A) after sub-

section (3) and

before Sub-section

(4) of section 134

With the insertion sub-section

(3A) in Section 134, a one person

company can make its Board

Report in a very precise and

shortened manner provide it is

prescribed by the Central

Government.

22 135(1)

Every company having net

worth of rupees five hundred

crore or more, or turnover of

rupees one thousand crore or

more or a net profit of rupees

five crore 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 an independent

director.

Every company having net

worth of rupees five hundred

crore or more, or turnover of

rupees one thousand crore or

more or a net profit of rupees

five crore or more during the

immediately preceding

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 an

independent director.

"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.";

It is

proposed that the

words “any

financial year” be

replaced by the

words ‘preceding

financial year

This proviso is

inserting for the

first time under

section 135(1)

As per the MCA General Circular

No. 21/2014 dated 18.06.2014, “any

financial Year” implies “any of the 3

financial year “

However due to the proposed

amendment the eligibility criteria

has been changed which inter-alia

states that for the purpose of

constituting CSR committee and

incurring exp. towards CSR

activities the said financial year

means the immediately preceding

Financial Year.

Earlier it has been mentioned in the

rule 5 of the companies (Corporate

social responsibility Policy) Rules,

2014, now it has become the part of

the section 135 in proposed

amendment.

Whereof as per the proposed

amendment states that in case of

unlisted companies and private

companies where they are not

required to appoint Independent

Directors pursuant to the provisions

of Sec 149(4) shall have its CSR

Committee with minimum two

directors only.





135(3)

(a)

formulate and recommend to

the Board, a Corporate

Social Responsibility Policy

which shall indicate the

activities to be undertaken

by the company as specified

in Schedule VII

Formulate and recommend to

the Board, a Corporate Social

Responsibility Policy which

shall indicate the activities to be

undertaken by the company in

areas or subject, specified in

Schedule VII

Under section

135(3)(a), the

following words

“as specified in

Schedule VII

Is substituted by

“in areas or

subject, specified

in Schedule VII”

Schedule VII indicates the broad

areas of activities for spending as

CSR. Accordingly, for liberal

interpretation and to bring more

clarity, it is proposed that instead of

providing that CSR policy has to

indicate the activities to be

undertaken by the company as

specified in Schedule VII, it should

indicate the activities to be

undertaken in areas or

subjects specified in Schedule VII.

22 137(1) Fourth Proviso

Provided also that a

company shall, along with

its financial statements to be

filed with the Registrar,

attach the accounts of its

subsidiary or subsidiaries

which have been

incorporated outside India

and which have not

established their place of

business in India.

'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 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

Fifth proviso

inserted in sub

section 1 of section

137

Now, Holding Indian Company can

attach unaudited financial statement

of its foreign subsidiary while filing

its financial statement with ROC.

Further, a declaration has to be

submitted by the holding company

that its foreign subsidiary does not

required to get its accounts audited

as per law of the country in which it

is incorporated and therefore the

foreign subsidiary does not get such

accounts audited.

Further, financial statement of

Foreign subsidiary has to be

translated into English language, if

the same is in any other language and

translated copy has to be attached in

the form.

23 139(1) Provided that the company

shall place the matter

relating to such appointment

for ratification by members

at every annual general

meeting:

Omitted First Proviso of

Section 139(1) will

be omitted

Now, Companies once appointed

statutory auditors for five years in

Annual General Meeting doesn’t

require to place their ratification

at subsequent annual general

meetings.

24

.

141(3)

(i) any person whose

subsidiary or associate

company or any other form

of entity, is engaged as on

the date of appointment in

consulting and specialised

services as provided in

section 144.

‘(i) a person who, directly or

indirectly, renders any service

referred to in section 144 to the

company or its holding

company or its subsidiary

company.

Explanation.—For the purposes

of this clause, the term "directly

or indirectly" shall have the

meaning assigned to it in the

Explanation to section 144.’.

Clause (i)

substituted and

explanation

inserted in clause

(i)

By substituting clause (i), it is

clarified that restriction under this

clause will be applicable, only if the

services were rendered to the

company in which it is proposed to

appoint the auditor or its holding

company or its subsidiary company

http://ebook.mca.gov.in/Actpagedisplay.aspx?PAGENAME=17528





.

143(1) Provided that the auditor of

a company which is a

holding company shall also

have the right of access to

the records of all its

subsidiaries in so far as it

relates to the consolidation

of its financial statements

with that of its subsidiaries.

Provided that the auditor of a

company which is a holding

company shall also have the

right of access to the records of

all its subsidiaries and

associate companies in so far

as it relates to the consolidation

of its financial statements with

that of its subsidiaries and

associate companies.

Under section

143(1) in the

proviso, the

following words”

its subsidiaries

and associate

companies” is

inserted.

Such changes provide for auditors of

holding company to have right to

access records of subsidiaries as well

as associate company.

26 143(3)

(i)

whether the company has

adequate internal financial

controls system in place

and the operating

effectiveness of such

controls

whether the company has

adequate internal financial

controls with reference to

financial statements in place

and the operating effectiveness

of such controls

Under section

143(3)(i) the

following words,

Internal financial

control system”

are substituted by

internal financial

controls with

reference to

financial

statements

Earlier the statement Internal

Financial Control was wide in

nature and auditor has to

comment thereon, now the

proposed amendment give

relaxation to the auditor to

comment on the internal financial

control with reference to financial

statement only.

27

.

143(14

)

The provisions of this

section shall mutatis

mutandis apply to— (a) the

cost accountant in practice conducting cost audit under

section 148; or

(b) the company secretary in

practice conducting

secretarial audit under

section 204

The provisions of this section

shall mutatis mutandis apply

to—

(a) the cost accountant

conducting cost audit under

section 148; or

(b) the company secretary in

practice conducting secretarial

audit under section 204

Under section

143(14) the

following words “

cost accountant in

practice” are

substituted by “cost

accountant’

It is just to remove the ambiguity..

28

.

149 [(3) Every company shall

have at least one director

who has stayed in India for

a total period of not less

than one hundred and

eighty-two days in the

previous calendar year

(6) An independent director

in relation to a company,

means a director other than

a managing director or a

whole-time director or a

nominee director,-

[(c) who has or had no

pecuniary relationship with

the company, its holding,

subsidiary or associate

company, or their

promoters, or directors,

during the two immediately

preceding financial years or

during the current financial

year

"(3) Every company shall have

at least one director who stays

in India for a total period of not

less than one hundred and

eighty-two days during the

financial year:

Provided that in case of a newly

incorporated company the

requirement under this sub-

section shall apply

proportionately at the end of the

financial year in which it is

incorporated.";

(ii) "pecuniary relationship,

other than remuneration as such

director or having transaction

not exceeding ten per cent. of

his total income or such amount

as may be prescribed"

Sub-section 3

substituted. Words

‘previous calendar

year’ replaced by

‘during the

financial year’ and

Proviso inserted in

sub-section 3

In Section 149(6)(c

) the words

‘pecuniary

relationship’

replaced by

“pecuniary

relationship, other

than remuneration

as such director or

having transaction

not exceeding ten

For checking the resident status of

director total period of 182 days of

current financial year shall be

considered. Further, For a newly

incorporated company the

requirement of ascertaining

residential status of a director will be

applicable in proportion to the date

of incorporation of the company

Independency of a director will not

be affected even if he received

remuneration from the company or

have transaction with the company

up to 10% of his total income





(d) none of whose relatives

has or had pecuniary

relationship or transaction

with the company, its

holding, subsidiary or

associate company, or their

promoters, or directors,

amounting to two per cent.

or more of its gross turnover

or total income or fifty lakh

rupees or such higher

amount as may be

prescribed, whichever is

lower, during the two


financial years or during the

current financial year;

(iii)"(d) none of whose

relatives—

(i) is holding any security of or

interest in the company, its

holding, subsidiary or associate

company during the two



current financial year:

Provided that the relative may

hold security or interest in the

company of face value not

exceeding fifty lakh rupees or

two per cent. of the paid-up

capital of the company, its


company or such higher sum as

may be prescribed;

(ii) is indebted to the company,

its holding, subsidiary or

associate company or their

promoters, or directors, in

excess of such amount as may

be prescribed during the two



current financial year;

(iii) has given a guarantee or

provided any security in

connection with the

indebtedness of any third

person to the company, its


company or their promoters, or

directors of such holding

company, for such amount as

may be prescribed during the

two immediately preceding


current financial year; or

(iv) has any other pecuniary

transaction or relationship with

the company, or its subsidiary,

or its holding or associate

company amounting to two per

cent. or more of its gross

turnover or total income singly

or in combination with the

transactions referred to in sub-

clause (i), (ii) or (iii);";

per cent. of his

total income or

such amount as

may be prescribed"

Clause (d) totally

substituted

Further, pecuniary relationship

entered into by the relative of

Independent Director has been

categorized by providing types of

transaction in Clause (d) of Section

149(6) i.e. shareholding in the

company, indebtedness, giving

guarantee or providing security in

connection with indebtedness of any

third person to the company. While

ascertaining Independence of a

director these additional criteria is

required to be checked by the

companies.

Further, independence of a director

is not affected even if its relative is

an employee of the company during




Amendment Bill, 2017 e) who, neither himself nor

any of his relatives—

(i) holds or has held the

position of a key managerial

personnel or is or has been

employee of the company

or its holding, subsidiary

or associate company in

any of the three financial

years immediately

preceding the financial year

in which he is proposed to

be appointed

(iv) "Provided that in case of a

relative who is an employee,

the restriction under this

clause shall not apply for his employment during preceding

three financial years."

Proviso inserted in

clause (e), in sub-

clause (i)

preceding three financial years in

which he is proposed to be appointed

29

.

152(3) No person shall be

appointed as a director of a

company unless he has been

allotted the Director

Identification Number under

section 154

No person shall be appointed as

a director of a company unless

he has been allotted the

Director Identification Number

under section 154 or any other

number as may be prescribed

under section 153.

Under section

152(3) the

following words

“or any other

number as may be

prescribed under

section 153” are

inserted.

The change provides that be

appointed as a director, a person

should have a DIN or such other

number as prescribed under section

153.In other words the proposed

amendment provides Changes in the

section 153 i.e. Application for

allotment of DIN, Which provides

that the Central Government may

prescribe such number that shall be

treated as DIN for the purpose of this

Act, and in any case any individual

holds or acquires such identification

number ( May be Aadhar), the

requirement to apply for DIN shall

not apply or shall apply in the

prescribed manner.

Now every person wants to

appointment as director in the

company shall hold DIN or such

identification number as prescribed

by the central govt.

30

.

152(4) Every person proposed to be

appointed as a director by

the company in general

meeting or otherwise, shall

furnish his Director

Identification Number and a

declaration that he is not

disqualified to become a

director under this Act

Every person proposed to be

appointed as a director by the

company in general meeting or

otherwise, shall furnish his

Director Identification Number

or such other number as may

be prescribed under section

153 and a declaration that he is

not disqualified to become a

director under this Act

Under section

152(4) the

following words

“or such other

number as may be

prescribed under

section 153” are

inserted.

The change provides that be

appointed as a director, a person

should have a DIN or such other

number as prescribed under section

153.In other words the proposed

amendment provides Changes in the

section 153 i.e. Application for

allotment of DIN, Which provides

that the Central Government may

prescribe such number that shall be

treated as DIN for the purpose of this

Act, and in any case any individual

holds or acquires such identification

number, the requirement to apply

for DIN shall not apply or shall

apply in the prescribed manner.

Now every person wants to

appointment as director in the

company shall furnish DIN or such

identification number as prescribed

by the central govt.





.

160(1) A person who is not a

retiring director in terms of

section 152 shall, subject to

the provisions of this Act, be

eligible for appointment to

the office of a director at any

general meeting, if he, or

some member intending to

propose him as a director,

has, not less than fourteen

days before the meeting, left

at the registered office of the

company, a notice in writing

under his hand signifying his

candidature as a director or,

as the case may be, the

intention of such member to

propose him as a candidate

for that office, along with the

deposit of one lakh rupees or

such higher amount as may

be prescribed which shall be

refunded to such person or,

as the case may be, to the

member, if the person

proposed gets elected as a

director or gets more than

twenty-five per cent. of total

valid votes cast either on

show of hands or on poll on

such resolution

Provided that requirements

of deposit of amount shall not

apply in case of appointment

of an independent director or

a director recommended by

the Nomination and

Remuneration Committee, if

any, constituted under sub-

section (1) of section 178.

Proviso inserted in

Sub-Section 1 of

Section 160

Deposit of Rs. 1 Lakh is not required

in case of appointment of

Independent director in the

company. Only Candidature notice

will be required for the appointment

of Independent Director in general

meeting.

Further, when Nomination and

Remuneration committee

recommend appointment of a

director in that case also deposit of

Rs. 1 lakh is not required.

32 161 (2) The Board of Directors

of a company may, if so

authorised by its articles or

by a resolution passed by


meeting, appoint a person,

not being a person holding

any alternate directorship

for any other director in the

company, to act as an

alternate director for a

director during his absence

for a period of not less than

three months from India

(4) In the case of a public

company, if the office of

any director appointed by


meeting is vacated before

his term of office expires in

the normal course, the

resulting casual vacancy

may, in default of and

subject to any regulations in

the articles of the company,

be filled by the Board of

a) Or holding

directorship in the

same company

b) In the case of a public

company

c) which shall be

subsequently approved

by members in the

immediate next

general meeting

In Section 164(2)

words ‘holding

directorship in the

same company’

inserted after the

words ‘alternate

directorship for any

other director in the

company’

In Section 164(4)

words ‘In the case

of a public

company’ omitted

In Section 164(4)

words ‘which shall

be subsequently

approved by

members in the

immediate next

general meeting’

inserted after the

words ‘meeting of

the Board’

Clarification - Board of a company

cannot appoint any of its director as

alternate director for any other

director in the same company.

Now, private companies can also fill

the casual vacancy created due to

vacation of the office of a director, in

its board meeting.

Casual vacancy filed by the board of

a company has to be approved by the

shareholders in the subsequent

general meeting.




Amendment Bill, 2017 Directors at a meeting of the

Board:

33 164 2) No person who is or has

been a director of a

company which—

(a) has not filed financial

statements or annual returns

for any continuous period of

three financial years; or

(b) has failed to repay the

deposits accepted by it or

pay interest thereon or to

redeem any debentures on

the due date or pay interest

due thereon or pay any

dividend declared and such

failure to pay or redeem

continues for one year or

more, shall be eligible to be

re-appointed as a director of

that company or appointed

in other company for a

period of five years from the

date on which the said

company fails to do so.]

Provided that where a person is

appointed as a director of a

company which is in default of

clause (a) or clause (b), he shall

not incur the disqualification

for a period of six months from

the date of his appointment.";

Proviso inserted in

Section 164(2)

New Director in a company which

has made default under section

162(2) given six months’ time to

make the company compliant and if

new director did not make the

compliance under section 164(2)

within the aforementioned period

then he will also be disqualified.

34 165 Explanation.— For

reckoning the limit of public

companies in which a

person can be appointed as

director, directorship in

private companies that are

either holding or subsidiary

company of a public

company shall be included

Explanation II.—For

reckoning the limit of

directorships of twenty

companies, the directorship

in a dormant company shall

not be included

Explanation II

inserted in Section

165(1)

Now, Dormant Companies shall also

be excluded while checking the limit

of directorship of twenty companies

for a director

35

.

167(1)

(a)

Under section 167(1)(a) the

following proviso inserted.

"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.";

Under section

167(1)(a) the

following proviso

inserted.

The change provides Section 164(2)

lists out disqualifications related to

the company such as non-

compliance of annual filing

requirements, etc. It was observed

that the existing provision of section

167(1)(a) created a paradoxical

situation, as the office of all the

directors in a Board would become

vacant where they are disqualified

under Section 164(2), and a new

person could not be appointed as a

director as they would also attract

such a disqualification, thus in this

regard vacancy in the office of a

director is to be triggered when

disqualification is incurred in




Amendment Bill, 2017 personal capacity and in case of

disqualification under section

164(2) the office of the director shall

become vacant in all companies,

other than the company which is in

default under that sub-section.

36

.

167(1)

(f)

he is convicted by a court of

any offence, whether

involving moral turpitude or

otherwise and sentenced in

respect thereof to

imprisonment for not less

than six months:

Provided that the office

shall be vacated by the

director even if he has

filed an appeal against the

order of such court;

The Proviso under section

167(1)(f) is substituted as

follows:

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.".

The Proviso under

section 167(1)(f) is

substituted.

The change has been provided to

remove the inconsistent situation

when read with the proviso to section

164(3), as these provided for a

person to be appointed as a

director if he has been convicted/

disqualified by a court and

an appeal is pending, though

such consideration is not allowed in

case the director has to vacate his

office and an appeal has been

preferred against such conviction

and sentence, thus in case of

requirement for vacation of

office should not take place till the

appeal has been disposed off.

37

.

168 Provided that a director

shall also forward a copy of

his resignation along with

detailed reasons for the

resignation to the Registrar

within thirty days of

resignation in such manner

as may be prescribed

director may also forward In the proviso of

Section 168(1),

words ‘director

shall also forward’

replaced by

‘director may also

forward’

The mandatory filing of resignation

by the director to ROC has been

given away.

Now, director has option to choose

whether they want to file their

resignation with ROC or not.

38 Sec.

173

There was only one proviso

to Section 173 (2) viz.

‘Provided that the Central

Government may, by

notification, specify such

matters which shall not be

dealt with in a meeting

through video conferencing

or other audio visual means.

There is an insertion of second

proviso to Section 173(1) viz.

"Provided further that where

there is quorum in a meeting

through physical presence of

directors, any other director

may participate through video

conferencing or other audio

visual means in such meeting on

any matter specified under the

first

Proviso."

After 1st Proviso to

Section 173 (2) the

following Proviso

has been inserted as

2nd Proviso to

Section 173(2):

"Provided further

that where there is

quorum in a

meeting through

physical presence

of directors, any

other director may

As per first proviso certain matters

such as approval of financial

statement, approval of board report

etc. cannot be dealt through video

conferencing.

But now, if requisite quorum is

present physically in the meeting

in which the above mentioned

matters are going to be discussed

then other directors can

participate in the meeting through

video conferencing







Amendment Bill, 2017 participate through

video conferencing

or other audio

visual means in

such meeting on

any matter

specified under the

first

Proviso."

39 Sec.

177

a) Text of Section 177(1):

The Board of Directors of

every listed company and

such other class or classes of

companies, as may be

prescribed, shall constitute

an Audit Committee.

b) There was only one

Proviso to Section 177(4)

(iv) viz.

Provided that 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

a) Text of Section 177(1) after

substitution:

The Board of Directors of every

listed public company and such

other class or classes of


prescribed, shall constitute an

Audit Committee.

b) There will insertions of

second, third & fourth Proviso

to Section 177 (4) (iv) viz.

Provided further that in case of

transaction, other than

transactions referred

to in section 188, and where

Audit Committee does not

approve the transaction,

it shall make its

recommendations to the Board

{as second proviso to Section

177(4)(iv)}

Provided also that in case any

transaction involving any

amount not exceeding one crore

rupees is entered into by a

director or officer of the

company without obtaining the

approval of the Audit Committee

and it is not ratified by the Audit

Committee within three months

from the date of the transaction,

such transaction shall be

voidable at the option of the

Audit Committee and if the

transaction is with the related

party to any director or is

authorised by any other

Under Section

177(1) the words

every listed

company are

substituted by

words every listed

public company

There is insertion

of three more

provisos to

Section 177 (4)

(iv)

Impact would be :

Only public companies whose

securities are listed on a recognized

stock exchange are liable to constitute

Audit Committee and those private

companies who are listed are no

longer required to constitute Audit

Committee and therefore any

provision of Companies Act, 2013

which are applicable on Audit

Committee will not be applicable to

private companies.

As per second proviso to Section

179(4) (iv), all transaction with

related parties (other than transactions

as specified in Section 188) required

approval of audit committee.

Further, if transactions as specified

above is not approved by the Audit

Committee then the Audit Committee

shall recommend the same to the

Board.

Secondly, with the insertion of third

Proviso to Section 174(4) (iv) : Every

transaction exceeding Rs. 1 crore

require prior approval of audit

committee.

However, transaction which is entered

by a director or officer of the

Company up to the limit of Rs. 1

Crore and for which prior approval

of audit committee has not been taken

then it is mandatory to get the same

ratified by the Audit Committee

within 3 months from the date of

transaction, otherwise Audit

Committee has option to annul the

transactions

Further if such transaction is entered

with any related person to any director

or authorized by any other director




Amendment Bill, 2017 director, the director concerned

shall indemnify the company

against any loss incurred by it

{as third proviso to Section

177(4)(iv)}

Provided also that the provisions

of this clause shall not apply to

a transaction, other than a

transaction referred to in section

188, between a holding

company and its wholly owned

subsidiary company {as fourth

proviso to Section 177(4)(iv)}

then, the director concerned will be

liable to compensate the company

against any losses incurred by it.

Now, Whenever a holding company

entered into transaction (other than

transactions as specified in Section

188) with its wholly owned subsidiary

then in that case approval of audit

committee is not required to be taken

40

.

178 a) Text of Section 178 (1)

The Board of Directors of

every listed company or

such other class or classes

of companies, as may be

prescribed shall constitute

the Nomination and

Remuneration Committee

consisting of three or more

non-executive directors out

of which not less than one-

half shall be independent

directors

b) Text of Section 178 (2)

The Nomination and

Remuneration Committee

shall identify persons who

are qualified to become

directors and who may be

appointed in senior

management in accordance

with the criteria laid down,

recommend to the Board

their appointment and

removal and shall carry out

evaluation of every

director’s performance.

a) Text of Section 178 (1) after

substitution:

The Board of Directors of every

listed public company or such

other class or classes of


prescribed shall constitute the

Nomination and Remuneration

Committee consisting of three or

more non-executive directors

out of which not less than one-

half shall be independent

directors

b) Text of Section 178 (2) after

substitution:

The Nomination and

Remuneration Committee shall

identify persons who are

qualified to become directors

and who may be appointed in

senior management in

accordance with the criteria

laid down, recommend to the

Board their appointment and

removal and shall specify the

manner for effective evaluation

of performance of Board, its

committees and individual

directors to be carried out

either by the Board, by the


Committee or by an

independent

external agency and review its

implementation and

compliance

Under Section

178(1) the words

every listed

company are

substituted by

words every listed

public company

Under Section

178(2) the words

shall carry out

evaluation of

every director’s

performance are

substituted by

words shall

specify the

manner for

effective

evaluation of

performance of

Board, its

committees and

individual

directors to be

carried out either

by the Board, by

the Nomination

and

Remuneration

Committee or by

an independent

external agency

and review its

Only public companies whose

securities are listed on a recognized

stock exchange are liable to constitute


Committee and those private

companies who are listed are not

required to constitute Nomination and

Remuneration Committee and

therefore any provision of Companies

Act, 2013 which are applicable on

nomination and Remuneration

Committee will also not be applicable

to private company.

Now, the Nomination and

Remuneration Committee has to

specify the manner for evaluation of

performance of board (for instance

by framing policies or

questionnaires etc), every committee

of the Board and every director of the

Company.


Committee of the Company is not

mandatorily required to do the

performance evaluation of Every

Director of the Company itself. Now,

board or any independent external

agency can also carry out the

performance evaluation of board, its

committee and every individual

director and NRC committee has to

keep a check on the same.





c) The text of proviso to

Section 178(4) (c ):

Provided that such policy

shall be disclosed in the

Board's report.

d) The text of Proviso to

Section 178 (8) is:

Provided that non-

consideration of resolution

of any grievance by the

Stakeholders Relationship

Committee in good faith

shall not constitute a

contravention of this section

c)The first proviso to Section

178 (4) (C) is substituted by

following proviso:

Provided that such policy shall

be placed on the website of the

company, if any, and the salient

features of the policy and

changes therein, if any, along

with the web address of the

policy, if any, shall be disclosed

in the Board's

Report

d)The text of Proviso to Section

178 (8) after substitution:

Provided that inability to

resolve or consider any

grievance by the Stakeholders

Relationship Committee in good

faith shall not constitute a

contravention of this section

implementation

and compliance

c)the whole

proviso to section

178 (4) (c) has

been substituted

with the new

proviso namely:

Provided that such

policy shall be

placed on the

website of the

company, if any,

and the salient

features of the

policy and

changes therein, if

any, along with

the web address of

the policy, if any,

shall be disclosed

in the Board's

Report

Under Proviso to

Section 178 (8) the

words non-

consideration of

resolution of any

grievance shall be

substituted with

inability to resolve

or consider any

grievance

Companies are not required to

disclose the whole Policy for

remuneration to directors, key

managerial personnel and senior

management in its Board Report

rather it will be sufficient to disclose

only the salient features of the said

policy and any changes made therein

along with the web address of the

Policy in the Board Report. Further

the Company shall mandatorily place

the whole Policy on the website of the

Company, if any.

Now, stakeholder Relationship

committee has to consider each and

every grievance and try to resolve the

same , so that it won’t be considered

as contravention of Section 178

whereas post amendment the situation

would be:

Further, if stakeholder Relationship

committee is unable to resolve any

grievance then Committee shall be

liable to prove its inability for the

same otherwise it will be treated as

contravention of Section 178 by the

Company.

41 180 The Text of Section 180 (1)

(c):

to borrow money, where the

money to be borrowed,

together with the money

already borrowed by the

company will exceed

The text of Section 180 (1) (c)

after substitution:

to borrow money, where the

money to be borrowed, together

with the money already

borrowed by the company will

Under Section 180

(1) (c ) the words

paid-up share

capital

and free reserves

will stand

substituted with

Impact would be:

Where the existing borrowings along

with the proposed borrowing of the

Company exceeds paid up share

capital of and free reserves and

securities premium of the Company

then the company is required to take




Amendment Bill, 2017 aggregate of its paid-up

share capital

and free reserves, apart

from temporary loans

obtained from the company’s

bankers in the ordinary

course of business

exceed aggregate of its paid-up

share capital

and free reserves and securities

premium, apart from temporary

loans obtained from the

company’s bankers in the

ordinary course of business

words its paid-up

share capital

and free reserves

and securities

premium.

approval of Shareholders by way of

passing a special resolution. Earlier

the securities Premium account of the

Company was not considered while

calculating the limit of borrowings

under Section 180 (1) (c ) and the

insertion of such will broaden the

monetary limit of borrowing for any

company without taking the approval

of shareholders by way of passing

Special Resolution.

42 184 The text of Section 184 (4)

is:

If a director of the company

contravenes the provisions

of sub-section (1) or

subsection (2), such director

shall be punishable with

imprisonment for a term

which may extend to one

year or with fine which shall

not be less than fifty

thousand rupees but which may extend to one lakh

rupees, or with both.

The text of Section 184 (4) after

omission will be:

If a director of the company

contravenes the provisions of

sub-section (1) or subsection

(2), such director shall be

punishable with imprisonment

for a term which may extend to

one year or with fine which may

extend to one lakh rupees, or

with both.

The words “shall

not be less than

fifty thousand

rupees but which”

are omitted from

the text of Section

184 (4)

The Impact would be:

In case of Contravention of Section

184 of Companies Act, 2013 the by

director of a company, such director

can be fined up to maximum of Rs. 1

Lakh only and there is no minimum

limit on imposition of fine on the

director, which was earlier Rs.

50,000.

Therefore in case of contravention of

this section by any director of the

Company the fine can even be Rs. 1.

43 185 Text of Section185 (1) of

companies act 2013 as

under:

Save as otherwise provided

in this Act, no company

shall, directly or indirectly,

advance any loan, including

any loan represented by a

book debt, to any of its

directors or to any other

person in whom the director

is interested or give any

guarantee or provide any

security in connection with

any loan taken by him or

such other person

Text of Section 185(1) under

companies bill substituted as

under:

No company shall, directly or

indirectly, advance any loan,

including any loan represented

by a book debt to, or give any

guarantee or provide any

security in connection with any

loan taken by - (a) any director

of company, or of a company

which is its holding company or

any partner or relative of any

such director; or (b) any firm in

which any such director or

relative is a partner.

Text of Section 185(2) as

inserted under companies

amendment bill:

(2) A company may advance

any loan including any loan

represented by a book debt, or

give any guarantee or provide

any security in connection with

any loan taken by any person in

whom any of the director of the

company is interested, subject

to the condition that— (a) a

special resolution is passed by

Completely

substituted with

new Sub

section(1) of

section 185

A new Sub

Section (2) to

section 185 has

been inserted.

The impact of this new substitution

would be as under :

Companies are now completely

prohibited i.e. companies cannot

directly or indirectly advance any

loan, give any guarantee or provide

any security to directors of the

holding company;

the partner or relative of director of

such holding companies and to the

firm in which such director or

director of the holding company or

relative of any such directors is a

partner.

Companies were previously

restricted to advance loan or give

any guarantee or provide any

security to any person in whom any

of its director is interested, which

now has been allowed subject to

fulfilment of conditions as follows:

Special resolution in this regard has to

be passed by the company in its

general meeting.

Also the explanatory statement to the

notice of such general meeting shall

contain full particulars of such loan,





Text of Explanation to

Section 185

For the purposes of this

section, the expression “to

any other person in whom

director is interested”

means—

(a) any director of the

lending company, or of a

company which is its holding

company or any partner or

relative of any such director;

(b) any firm in which any

such director or relative is a

partner;

5&6[(c) any private

company of which any such

director is a director or

member;]

(d) any body corporate at a

general meeting of which not

less than twenty five per cent.

of the total voting power may

be exercised or controlled by

any such director, or by two

or more such directors,

together; or

(e) any body corporate, the

Board of directors,

managing director or

manager, whereof is

accustomed to act in

accordance with the

directions or instructions of

the Board, or of any director

or directors, of the lending

company.


meeting: Provided that the

explanatory statement to the

notice for the relevant general

meeting shall disclose the full

particulars of the loans given,

or guarantee given or security

provided and the purpose for

which the loan or guarantee or

security is proposed to be

utilised by the recipient of the

loan or guarantee or security

and any other relevant fact;

and (b) the loans are utilised by

the borrowing company for its

principal business activities.

Explanation.—For the purposes

of this sub-section, the

expression "any person in whom

any of the director of the

company is interested" means—

(a) any private company of

which any such director is a

director or member; (b) any

body corporate at a general

meeting of which not less than

twenty-five per cent. of the total

voting power may be exercised

or controlled by any such

director, or by two or more such

directors, together; or (c) any

body corporate, the Board of

directors, managing director or

manager, whereof is

accustomed to act in

accordance with the directions

or instructions of the Board, or

of any director or directors, of

the lending company

Text of Section 185(3) as

inserted under Companies bill:

Nothing contained in sub-

sections (1) and (2) shall apply

to—

(a) the giving of any loan to a

managing or whole-time

Explanation to

section 185 has

been substituted

guarantee given and security

provided & the purpose for which it

will be utilised.

Also such loan can only be utilised

by borrowing company for its

principal business activities and not

for any other purposes.

The definition of the expression “to

any other person in whom director is

interested has been changed. The

impact of which would we as under:

Now the companies are allowed to

advance loan or give any guarantee or

provide any security to:

(1)Private companies in which any

such director is director or member

and

(2)To any body corporate in which

such director or two or more such

director can exercise or controls

25% of total voting power at its

general meeting or

(3) To any body corporate where

board of director, managing

director or manager acts in

accordance with the directions

given by the director of such

lending company subject to

fulfilment of conditions as

prescribed above.

http://ebook.mca.gov.in/Childwindow1.aspx?pageid=17579&type=CA&ChildTitle=&SearchText=185#200002

http://ebook.mca.gov.in/Childwindow1.aspx?pageid=17579&type=CA&ChildTitle=&SearchText=185#6605





Text of Section 185 as under

Companies act, 2013 :

Provided that nothing

contained in this sub-section

shall apply to—

(a) the giving of any loan to

a managing or whole-time

director

(i) as a part of the conditions

of service extended by the

company to all its

employees; or

(ii) pursuant to any scheme

approved by the members by

a special resolution; or

(b) a company which in the

ordinary course of its

business provides loans or

gives guarantees or

securities for the due

repayment of any loan and in

respect of such loans an

interest is charged at a rate

not less than the bank rate

declared by the Reserve

Bank of India.

(c) any loan made by a

holding company to its

wholly owned subsidiary

company or any guarantee

given or security provided by

a holding company in

respect of any loan made to

its wholly owned subsidiary

company; or

(d) any guarantee given or

security provided by a

holding company in respect

of loan made by any bank or

financial institution to its

subsidiary company:

Provided that the loans

made under clauses (c) and

(d) are utilised by the

subsidiary company for its

principal business

activities.]

If any loan is advanced or a

guarantee or security is

given or provided in

contravention of the

provisions of sub-section (1),

the company shall be

punishable with fine which

shall not be less than five

director— (i) as a part of the

conditions of service extended

by the company to all its

employees; or (ii) pursuant to

any scheme approved by the

members by a special

resolution; or (b) a company

which in the ordinary course of

its business provides loans or

gives guarantees or securities

for the due repayment of any

loan and in respect of such loans

an interest is charged at a rate

not less than the rate of

prevailing yield of one year,

three year, five year or ten year

Government security closest to

the tenor of the loan; or (c) any

loan made by a holding

company to its wholly owned

subsidiary company or any

guarantee given or security

provided by a holding company

in respect of any loan made to its


company; or (d) any guarantee

given or security provided by a

holding company in respect of

loan made by any bank or

financial institution to its

subsidiary company: Provided

that the loans made under

clauses (c) and (d) are utilised

by the subsidiary company for

its principal business activities.

.

If any loan is advanced or a

guarantee or security is given or

provided or utilised in

contravention of the provisions

of this section:-

(1) the company shall be

punishable with fine

which shall not be less

than five lakh rupees

but which may extend

to twenty-five lakh

rupees,

(2) Every officer of the

company who is in

default shall be

punishable with

imprisonment for a

term which may extend

A new sub section

(3) to section 185

has been inserted.

The new insertion has been made as

sub section(3) to section 185 order to

provide more clarity on the interest

rate and which inter-alia provides the

following:

Now, the interest rate to be charged

cannot be lower than the rate of

prevailing yield of one year, three

year, five year or ten year

government security closest to the

tenor of the loan. Further, inserted

sub section consolidates the

exemptions which were earlier also

provided.




Amendment Bill, 2017 lakh rupees but which may

extend to twenty-five lakh

rupees, and the director or

the other person to whom

any loan is advanced or

guarantee or security is

given or provided in

connection with any loan

taken by him or the other

person, shall be punishable

with imprisonment which

may extend to six months or

with fine which shall not be

less than five lakh rupees but

which may extend to twenty-

five lakh rupees, or with

both.]

to six months or with

fine which shall not be

less than five lakh

rupees but which may

extend to twenty-five

lakh rupees

(3) The director or the

other person to whom

any loan is advanced

or guarantee or

security is given or

provided in connection

with any loan taken by

him or the other

person, shall be

punishable with

imprisonment which

may extend to six

months or with fine

which shall not be less

than five lakh rupees

but which may extend

to twenty-five lakh

rupees, or with both.'.

A new sub section

(4) to section 185

has been inserted.

With the inserted new sub section ( 4)

Any loan advanced or a guarantee or

security is given utilised in

contravention of the provisions of this

section then penalty prescribed for

officer of the company who is in

default also.

44 186 –

Loan

and

Invest

ment

by

Comp

any

No company shall directly or

indirectly —

(a) give any loan to any

person or other body

corporate;

(b) give any guarantee or

provide security in

connection with a loan to

any other body corporate or

person; and

(c) acquire by way of

subscription, purchase or

otherwise, the securities of

any other body corporate,

exceeding sixty per cent of its

paid-up share capital, free

reserves and securities

premium account or one

hundred per cent of its free

reserves and securities

premium account, whichever

is more.

Where the giving of any loan

or guarantee or providing

any security or the

acquisition under sub-

section (2) exceeds the limits

specified in that sub-section,

prior approval by means of

a special resolution

passed at a general meeting

shall be necessary.

'Explanation.—For the

purposes of this sub-section, the

word "person" does not include

any individual who is in the

employment of the company.’

Where the aggregate of the

loans and investment so far

made, the amount for which

guarantee or security so far

provided to or in all other

bodies corporate along with the

investment, loan, guarantee or

security proposed to be made

or given by the Board, exceed

the limits specified under sub-

section (2), no investment or

loan shall be made or

A new

Explanation to sub

section (2) of

section 186 has

been inserted

Sub section (3) to

section 186 is

substituted.

The purpose of inserting this

explanation was to exclude the

employees from the ambit of this

section i.e. employees who are

provided loan as a part of condition of

service or pursuant to any approved

scheme will not be covered under this

section.

With the substitution of new sub

section (3) to section 186

shareholder approval will now not

be required in case:

(1) The loan or guarantee has been

provided or security is given by the


http://ebook.mca.gov.in/notificationdetail.aspx?acturl=6CoJDC4uKVUR7C9Fl4rZdatyDbeJTqg3uaDT7Vp4Q4/xVAVHx4znbqGDxENH1Jp3xqnr085Eew/oIMuhks7+9A==

http://ebook.mca.gov.in/notificationdetail.aspx?acturl=6CoJDC4uKVUR7C9Fl4rZdatyDbeJTqg3uaDT7Vp4Q4/xVAVHx4znbqGDxENH1Jp3xqnr085Eew/oIMuhks7+9A==







Nothing contained in this

section, except sub-section

(1), shall apply—

(a) to a loan made, guarantee

given or security provided

by a banking company or an

insurance company or a

housing finance company in

the ordinary course of its

business or a company

engaged in the business of

financing of companies or of

providing infrastructural

facilities;

(b) to any acquisition—

(i) made by a non-banking

financial company registered

under Chapter IIIB of the

Reserve Bank of India Act,

1934 and whose principal

business is acquisition of

securities:

Provided that exemption to

non-banking financial

company shall be in respect

of its investment and lending

activities;

(ii) made by a company

whose principal business is

the acquisition of securities;

(iii) of shares allotted in

pursuance of clause (a) of

sub-section (1) of section 62.

guarantee shall be given or

security shall be provided

unless previously authorised by

a special resolution passed in a

general meeting:

Provided that where a loan or

guarantee is given or where a

security has been provided by a


subsidiary company or a joint

venture company, or acquisition

is made by a holding company,

by way of subscription,

purchase or otherwise of, the

securities of its wholly owned

subsidiary company, the

requirement of this sub-section

shall not apply: Provided

further that the company shall

disclose the details of such loans

or guarantee or security or

acquisition in the financial

statement as provided under

sub-section (4).

Nothing contained in this

section shall apply— (a) to any

loan made, any guarantee given

or any security provided or any

investment made by a banking

company, or an insurance

company, or a housing finance

company in the ordinary course

of its business, or a company

established with the object of

and engaged in the business of

financing industrial enterprises,

or of providing infrastructural

facilities; (b) to any

investment— (i) made by an

investment company; (ii) made

in shares allotted in pursuance

of clause (a) of sub-section (1)

of section 62 or in shares

allotted in pursuance of rights

issues made by a body

corporate; (iii) made ,in respect

of investment or lending

activities, by a non-banking

financial company registered

under Chapter III-B of the

Reserve Bank of India Act, 1934

and whose principal business is

acquisition of securities."

Sub section (11) to

section 186 is

substituted

subsidiary company or its joint

venture or

(2) Where a holding company

acquires the securities of its wholly

owned subsidiary company.

Also it is specified that now it is

mandatory on the part of the

company to disclose the details of

such loan or guarantee provided or

security given in the financial

statements.

The substituted sub section (11) to

section 186 inter alia provides

exemption to:

Banking company, insurance

company, or a housing finance

company and a company

established with the object of and

engaged in the business of financing

industrial enterprises, or of

providing infrastructural facilities with respect to loan made, any

guarantee given or any security

provided or any investment made.

(b) investment made by investing

company or allotment pursuant to

right issue or made ,in respect of

investment or lending activities, by a

non-banking financial company

registered under Chapter III-B of the

Reserve Bank of India Act.





Amendment Bill, 2017 "(iv) made by a banking

company or an insurance

company or a housing

finance company, making

acquisition of securities in

the ordinary course of its

business."

For the purposes of this

section,—

(a) the expression

“investment company”

means a company whose

principal business is the

acquisition of shares,

debentures or other

securities;

(b) the expression

“infrastructure facilities”

means the facilities specified

in Schedule VI.]

The following text has been

inserted in the Explanation:

in clause (a), after the words

"other securities" the following

shall be inserted, namely:—

"and a company will be deemed

to be principally engaged in the

business of acquisition of

shares, debentures or other

securities, if its assets in the

form of investment in shares,

debentures or other securities

constitute not less than fifty per

cent of its total assets, or if its

income derived from investment

business constitutes not less

than fifty per cent as a

proportion of its gross income.".

Text has been

inserted in the

Explanation in

clause (a) to

Section 186

Now with the inserted explanation the

deemed investment company has also

been included in the definition of

investment company.

45 188 The text of Provisos to

Section 188 (1) are:

Provided that no contract or

arrangement, in the case of a

company having a paid-up

share capital of not less than

such amount, or transactions

not exceeding such sums, as

may be prescribed, shall be

entered into except with the

The following proviso is

inserted as third proviso to

Section 188 (1):

Provided also that nothing

contained in the second proviso

shall apply to a company in

which ninety per cent. or more

members, in number, are

relatives of promoters or are

related parties

With the Insertion

of new proviso

after second

proviso to Section

188 (1) the

existing provisos

to section 188 (1)

are renumbered

as:

A Company where the ninety per cent.

or more members, in number, are

relatives of promoters or are related

parties then in that case such member

instead of being a related party to any

contract or arrangement which is

proposed to be entered by the

company, can vote on the resolution

to approve such contract or

arrangement.





Amendment Bill, 2017 prior approval of the

company by a resolution

Provided further that no

member of the company

shall vote on such resolution,

to approve any contract or

arrangement which may be

entered into by the company,

if such member is a related

party

Provided also that nothing in

this sub-section shall apply

to any transactions entered

into by the company in its

ordinary course of business

other than transactions

which are not on an arm’s

length basis.

Provided also that the

requirement of passing the

resolution under first

proviso shall not be

applicable for transactions

entered into between a

holding company and its


whose accounts are

consolidated with such

holding company and placed

before the shareholders at

the general meeting for

approval.

The third proviso

will become the

fourth proviso and

the fourth proviso

will become the

fifth proviso.

46 196(4) Subject to the provisions of

section 197 and Schedule V,

a managing director, whole-

time director or manager

shall be appointed and the

terms and conditions of such

appointment and

remuneration payable be

approved by the Board of

Directors at a meeting which

shall be subject to approval

by a resolution at the next

general meeting of the

company and by the Central

Government in case such

appointment is at variance to

the conditions specified in

that Schedule:

Subject to the provisions of

section 197 and Schedule V, a

managing director, whole-time

director or manager shall be

appointed and the terms and

conditions of such appointment

and remuneration payable be

approved by the Board of

Directors at a meeting which

shall be subject to approval by a

resolution at the next general

meeting of the company and by

the Central Government in case

such appointment is at variance

to the conditions specified in

Part I of that Schedule".

Under section

196(4) the

following words

“specified in that

Schedule” is

substituted by

“specified in Part

I of that

Schedule”

Such change is kind of clarification in

nature.

47 197(1) Provided that the company

in general meeting may,

with the approval of the

Central Government,

authorise the payment of

remuneration exceeding

eleven per cent. of the net

Provided that the company in

general meeting may, authorise

the payment of remuneration

exceeding eleven per cent. of the

net profits of the company,

subject to the provisions of

Schedule V

Under section

197(1) the

following words

“with the

approval of the

Central

The change replaces the approval of

the Central Government for

managerial remuneration above the

prescribed thresholds with

approval by shareholders in the

general meeting by way of a special

resolution.




Amendment Bill, 2017 profits of the company,

subject to the provisions of

Schedule V

Provided further that, except


company in general

meeting,— (i) the

remuneration payable to any

one managing director; or

whole-time director or

manager shall not exceed

five per cent. of the net

profits of the company and if

there is more than one such

123 director remuneration

shall not exceed ten per cent.

of the net profits to all such

directors and manager taken

together;

(ii) the remuneration payable

to directors who are neither

managing directors nor

whole-time directors shall

not exceed,—

(A) one per cent. of the net

profits of the company, if

there is a managing or

whole-time director or

manager;

(B) three per cent. of the net

profits in any other case

Provided further that, except


company in general meeting by

a special resolution,—

(i) The remuneration payable to

any one managing director; or

whole-time director or manager

shall not exceed five per cent. Of

the net profits of the company

and if there is more than one

such 123 director remuneration

shall not exceed ten per cent. of

the net profits to all such

directors and manager taken

together;

(ii) the remuneration payable to

directors who are neither

managing directors nor whole-

time directors shall not

exceed,—

(A) one per cent. of the net

profits of the company, if there

is a managing or whole-time

director or manager;

(B) three per cent. of the net

profits in any other case

Provided also that, where any

term loan of any bank or public

financial institution is subsisting

or the company has defaulted in

payment of dues to non-

convertible debenture holders or

any other secured creditor, the

prior approval of the bank or

public financial institution

concerned or

the non-convertible debenture

holders or other secured

creditor, as the

case may be, shall be obtained

by the company before

obtaining the approval in the

general meeting.

Government” are

totally omitted

Under section

197(1)(a) 2nd

proviso the “after

the words "general

meeting,", the

words "by a

special

resolution," are

inserted;

Now the Company can make payment

of remuneration exceeding 11% of the

net profits of the company by passing

SR in the GM and now there is not

required to take the approval of the

central govt.

Such change is clarificatory in nature.

Approval of banks/public

financial institutions/non

-convertible debenture

holders/secured creditors is

required to be obtained in case of

default made by the company, before

obtaining the approval of members in

the general meeting.

Proposed amendment increase the

compliances required for those

company who has made default under

3rd proviso of section197 as

mentioned in the second column.

Following Compliances are required :

a) required to take the approval of

banks/public financial

institutions/non-convertible

debenture holders/secured creditors

before taking the approval of the

shareholder in the general meeting.

b)Approval of shareholder in the

general meeting( if Company is paid




Amendment Bill, 2017 remuneration to Director or WTD or

Manager in any financial year

increasing 11% of the net profit of that

financial year)

197(3) Notwithstanding anything

contained in sub-sections (1)

and (2), but subject to the

provisions of Schedule V, if,

in any financial year, a

company has no profits or its

profits are inadequate, the

company shall not pay to its

directors, including any

managing or whole-time

director or manager, by way

of remuneration any sum

exclusive of any fees

payable to directors under

sub-section (5) hereunder

except in accordance with

the provisions of Schedule V

and if it is not able to

comply with such

provisions, with the

previous approval of the

Central Government

Notwithstanding anything

contained in sub-sections (1)

and (2), but subject to the

provisions of Schedule V, if, in

any financial year, a company

has no profits or its profits are

inadequate, the company shall

not pay to its directors,

including any managing or

whole-time director or manager,

by way of remuneration any

sum exclusive of any fees

payable to directors under sub-

section (5) hereunder except in

accordance with the provisions

of Schedule V.

Under section

197(3) the

following words

“and if it is not

able to comply

with such

provisions, with

the previous

approval of the

Central

Government” are

omitted.

The change does away with the

restrictive regime of obtaining the

approval of the Central Government

for payment of managerial

remuneration by companies having

no/inadequate profits.

Proposed amendment give relaxation

to the those company who has

no/inadequate profit in any financial

year and wants to give a remuneration

to their director or WTD or Manager

provided that such company required

to comply the provision of schedule

V.

197(9) If any director draws or

receives, directly or

indirectly, by way of

remuneration any such sums

in excess of the limit

prescribed by this section or

without the prior sanction

of the Central

Government, where it is

required, he shall refund

such sums to the company

and until such sum is

refunded, hold it in trust for

the company.

If any director draws or

receives, directly or indirectly,

by way of remuneration any

such sums in excess of the limit

prescribed by this section or

without approval required

under this section, he shall

refund such sums to the

Company, within two years of

such lesser period as may be

allowed by the company, and

until such sum is refunded, hold

it in trust for the company.

Under section

197(9) the

following clause is

substituted.

As proposed amendment required is

clarificatory in nature, in light of the

approval of the Central Government

being done away with.

“without approval required under

this section” significances that Approval required under section

197(1) & (3) i.e. Approval of

shareholder in the general meeting or

approval of banks/public financial

institutions/non-convertible

debenture holders/secured creditors.

And Now every director who draws or

receives remuneration in excess of

limit prescribed or without the

approval required as mentioned above

shall refund to the company within 2

year of such lesser period as specified

by the company.

197(10

)

The company shall not

waive the recovery of any

sum refundable to it under

sub-section (9) unless

permitted by the Central

Government.

The company shall not waive

the recovery of any sum

refundable to it under sub-

section (9) unless approved by

the company by special

resolution within two years

from the date the sum

becomes refundable.

Under section 197

(10) the following

words “permitted

by the Central

Government” is

substituted by

“approved by the

company by

special resolution

within two years

from the date the

The change replaces the approval of

the Central Government for

managerial remuneration above the

prescribed thresholds with approval

by shareholders in the general

meeting by way of a special

resolution.

Now every company is required

taking the approval of shareholder in

the general meeting by passing the SR

for waive of such sum as specified in

the section 197(9).





Provided that where any term

loan of any bank or public

financial institution is subsisting

or the company has defaulted in

payment of dues

to non-convertible debenture

holders or any other secured

creditor, the prior approval of

the bank or public financial

institution concerned or the

Non-convertible debenture

holders or other secured

creditor, as the case may be,

shall be obtained by the

company before obtaining

approval of such waiver.

sum becomes

refundable’.

This proviso insert

under section

197(10).

Further approval of banks/public

financial institutions/non-

convertible

debenture holders/secured creditors

is required to be obtained in case

of

Default before obtaining the approval

of members in the general meeting.

197(11

)

In cases where Schedule V is

applicable on grounds of no

profits or inadequate profits,

any provision relating to the

remuneration of any director

which purports to increase or

has the effect of increasing

the amount thereof, whether

the provision be contained in

the company’s

memorandum or articles, or

in an agreement entered into

by it, or in any resolution

passed by the company in

general meeting or its Board,

shall not have any effect

unless such increase is in

accordance with the

conditions specified in that

Schedule and if such

conditions are not being

complied, the approval of

the Central Government

had been obtained.

In cases where Schedule V is

applicable on grounds of no

profits or inadequate profits, any

provision relating to the

remuneration of any director

which purports to increase or

has the effect of increasing the

amount thereof, whether the

provision be contained in the

company’s memorandum or

articles, or in an agreement

entered into by it, or in any

resolution passed by the

company in general meeting or

its Board, shall not have any

effect unless such increase is in

accordance with the conditions

specified in that Schedule.

Under section

197(10) the

following words”

and if such

conditions are

not being

complied, the

approval of the

Central

Government had

been obtained”

are omitted.

The change does away with the

requirement of obtaining approval of

the Central Government.

197 (16) The auditor of the company

shall, in his report under section

143,

make a statement as to whether

the remuneration paid by the

company to its

directors is in accordance with

the provisions of this section,

whether remuneration paid to

any director is in excess of the

limit laid down under this

Section and give such other

details as may be prescribed.

After sub-section

(15), the sub-

sections 16 & 17

shall be inserted.

The change relates to information

to be stated in the auditor‘s report

under section 143 with respect to

remuneration paid by the

company to its directors.




Amendment Bill, 2017 (17) On and from the

commencement of the

Companies (Amendment) Act,

2017, any application made to

the Central Government under

the provisions of

this section [as it stood before

such commencement], which is

pending with that

Government shall abate, and the

company shall, within one year

of such commencement, obtain

the approval in accordance with

the provisions of this

Section, as so amended."

Further, any application made to

the Central Government prior

to the Companies (Amendment)

Act, 2016

shall stand abated and the

company shall, within one year

of such commencement, obtain

the approval in accordance with

the provisions of this

Section, as so amended.

198(3)

(a)

profits, by way of premium

on shares or debentures of

the company, which are

issued or sold by the

company;

profits, by way of premium on

shares or debentures of the

company, which are issued or

sold by the company unless the

company is an investment

company as referred to in the

Explanation to section 186

Under section

198(3)(a) the

following words

“unless the

company is an

investment

company as

referred to in the

Explanation to

section 186” are

inserted.

The change provides that

for calculating net profit under this

section, profits on sale of

investments credit shall be given in

case of Investment Companies,

whose principal business was sale

and purchase of investments.

48 198(4)

(L)

the excess of expenditure

over income, which had

arisen in computing the net

profits in accordance with

this section in any year

which begins at or after the

commencement of this Act, in so far as such excess has

not been deducted in any

subsequent year preceding

the year in respect of which

the net profits have to be

ascertained;

the excess of expenditure over

income, which had arisen in

computing the net profits in

accordance with this section in

any year, in so far as such excess

has not been deducted in any

subsequent year preceding the

year in respect of which the net

profits have to be ascertained

Under section

197(4)(L) the

following words

“which begins at

or after the

commencement

of this Act, is

omitted

The change has been made to

provide for the deduction of brought

forward losses of the years prior to

the commencement of the Act, 2013.

49 403(1) Provided that any document,

fact or information may be

submitted, filed, registered

or recorded, after the time

specified in relevant

provision for such

submission, filing,

registering or recording,

within a period of two

hundred and seventy days

from the date by which it

should have been submitted,

filed, registered or recorded,

as the case may be, on

payment of such additional

fee as may be prescribed.

Provided that where any

document, fact or information

required to be submitted, filed,

registered or recorded, as the

case may be, under section 92

or 137 is not submitted, filed,


case may be, within the period

provided in those sections, it

may be submitted, filed,


case may be, after expiry of

period so provided in those

sections, on payment of such

additional fees as may be

prescribed , which shall not be

less than one hundred rupees per

day and different amounts may

be prescribed for different class

of companies:

The proviso 1&2

of section 403(1)

are substituted.

A big change in additional fees for

delay in filling documents as follows:

a. Delay in filling financial

statement and annual return

will lead to minimum Rs.

100 per day additional filling

fees;

b. Any other document will

lead to additional fees as

may be prescribed;

c. Default of two or more

occasions, the additional

fees shall be double the

actual additional fees.





Provided further that any

such document, fact or

information may, without

prejudice to any other legal

action or liability under the

Act, be also submitted, filed,

registered or recorded, after

the first time specified in

first proviso on payment of

fee and additional fee

specified under this section.

Provided further that where the

document, fact or information,

as the case may be, in cases

other than refered to in the first

proviso, is not submitted , filed,


case may be, within the period

provided in the relevant section

, it may, without prejudice to

any other legal action or liability

under this Act, be submitted,

filed, registered or recorded, as

the case may be, on payment of

such additional fee ,as may be

prescribed and different

amounts may be prescribed for

different class of companies::.

Provided also that where there is

default on two or more

occasions

in submitting, filing, registering

or recording of the document,

fact or information, it may,

without prejudice to any legal

action or liability under

this Act, be submitted, filed ,

registered or recorded , as the

case may be , on payment of a

higher additional fees, as may be

prescribed and which shall not

lesser than twice the additional

fees provided under the first or

second proviso as applicable.

403(2) Where a company fails or

commits any default to

submit, file, register or

record any document, fact or

information under sub-

section (1)before the expiry

of the period specified in the

first proviso to that sub-

section with additional fee,

the company and the officers

of the company who are in

default, shall, without

prejudice to the liability for

payment of fee and

additional fee, be liable for

the penalty or punishment

provided under this Act for

such failure or default

Where a company fails or

commits any default to submit,

file, register or record any

document, fact or information

under sub-section (1)before the

expiry of the period specified in

the relevant section with

additional fee, the company and

the officers of the company who

are in default, shall, without

prejudice to the liability for

payment of fee and additional

fee, be liable for the penalty or

punishment provided under this

Act for such failure or default

Under section

403(2) the

following words “

first proviso to

that sub-section”

is substituted by

“relevant

section”.

Before commencement of proposed

amendment there was ambiguity in

relation to interpretation of “first

proviso to that sub-section”.

As proposed amendment give a clear

picture of relevant section.

As per the proposed amendment

relevant section means: 92, 137

which is mention in the section

403(1).

50 441 Notwithstanding anything

contained in the Code of

Criminal Procedure, 19 Sub-

section (1) (a) and (b) 73,

any offence punishable

under this Act (whether

committed by a company or

any officer thereof) with

Notwithstanding anything

contained in the Code of

Criminal Procedure, 19 Sub-

section (1) (a) and (b) 73, any

offence punishable under this

Act (whether committed by a

company or any officer thereof)

not being an offence

Under section

441(1) the

following words

“with fine only”

is substituted by

“not being an

offence

punishable with

Before the proposed amendment, if

any offence punishable under the act

with fine only is compoundable by the

tribunal. Other offences punishable

with imprisonment or fine or both are

compoundable with the approval of

special court.




Amendment Bill, 2017 fine only, may, either before

or after the institution of any

prosecution, be compounded

by—

(a) the Tribunal; or

(b) where the maximum

amount of fine which may be

imposed for such

offence does not exceed five

lakh rupees, by the Regional

Director or any officer

authorised by the Central

Government,

on payment or credit, by the

company or, as the case may

be, the officer, to the Central

Government of such sum as

that Tribunal or the Regional



Government, as the case may

be, may specify:

Provided that the sum so

specified shall not, in any

case, exceed the maximum

amount of the fine which

may be imposed for the

offence so compounded:

Provided further that in

specifying the sum required

to be paid or credited for the

compounding of an offence

under this sub-section, the

sum, if any, paid by way of

additional fee under sub-

section (2) of section

403 shall be taken into

account:

Provided also that any

offence covered under this

sub-section by any company

or its officer shall not be

compounded if the

investigation against such

company has been initiated

or is pending under this Act.

punishable with

imprisonment only, or

punishable

with imprisonment and also

with fine, may, either before or

after the institution of any

prosecution, be compounded

by—

(a) the Tribunal; or

(b) where the maximum amount

of fine which may be imposed

for such offence does not exceed

five lakh rupees, by the

Regional Director or any officer


Government,

on payment or credit, by the

company or, as the case may be,

the officer, to the Central

Government of such sum as that

Tribunal or the Regional



Government, as the case may

be, may specify:

Provided that the sum so

specified shall not, in any case,

exceed the maximum amount of

the fine which may be imposed

for the offence so compounded:

Provided further that in

specifying the sum required to

be paid or credited for the

compounding of an offence

under this sub-section, the sum,

if any, paid by way of additional

fee under sub-section (2)

of section 403 shall be taken into

account:

Provided also that any offence

covered under this sub-section

by any company or its officer

shall not be compounded if the

investigation against such

company has been initiated or is

pending under this Act.

imprisonment

only, or

punishable

with

imprisonment

and also with

fine”.

As it is observed that as per scheme of

the act most of the offences which are

punishable with fine or imprisonment

or both are technical/ procedural in

nature and thus for the ease in

administration of the act, the old

provision relating to compounding

may be re-instated. Therefore, under

sub-section (1) the tribunal / Regional

director shall have the power to

compound offences punishable with

fine as well as offences punishable

with imprisonment or fine or both.

So non- compoundable offence shall

be:

a. Imprisonment only;

b. Punishable with

Imprisonment and also with

fine.

51 447 Without prejudice to any

liability including repayment

of any debt under this Act or

any other law for the time

being in force, any person

who is found to be guilty of

fraud, shall be punishable

with imprisonment for a

term which shall not be less

than six months but which

Without prejudice to any

liability including repayment of

any debt under this Act or any

other law for the time being in

force, any person who is found

to be guilty of fraud involving

an amount of at least

ten lakh rupees or one

percent. of the turnover of the

company, whichever is lower,

Under section 447

the following

words “guilty of

fraud” is

substituted by

“involving an

amount of at least

ten lakh rupees

or one percent. of

the turnover of

The change provides those frauds

involving less than 10 lac rupees to be

compoundable offences.

Now any company is punishable for a

fraud involving an amount of ten lakh

rupees or one percent of the

turnover of the company,

whichever is lower shall be

punishable with imprisonment for a







Amendment Bill, 2017 may extend to ten years and

shall also be liable to fine

which shall not be less than

the amount involved in the

fraud, but which may extend

to three times the amount

involved in the fraud:

Provided that where the

fraud in question involves

public interest, the term of

imprisonment shall not be

less than three years.

shall be punishable with

imprisonment for a term which

shall not be less than six months

but which may extend to ten

years and shall also be liable to

fine which shall not be less than

the amount involved in the

fraud, but which may extend to

three times the amount involved

in the fraud:

Provided that where the fraud in

question involves public

interest, the term of

imprisonment shall not be less

than three years.

the company,

whichever is

lower”.

term of 6 month. Therefore such

offence shall not be eligible for

compounding of offence under

section 441.





Thank you

Factum Legal Advocates & solicitors

Phone No: 011-41066313

M-17, 4th Floor, GK-2, Main Market, New Delhi-110048

www.factumlegal.com

[email protected]

http://www.factumlegal.com/

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