The Companies Act, 2013 (hereinafter referred to as “Companies Act”) enforced with the objective of regulating the affairs of companies incorporated in India was amended vide the Companies (Amendment) Act, 2017 (hereinafter referred to as “Amendment Act”) after receiving the assent of the President on January 3, 2018. By a recent notification dated May 7, 2018, Ministry of Corporate Affairs has made effective certain provisions of the said Amendment Act. Some of the said provisions have brought about the following changes in the Companies Act as below:
- Section 2(6): A company shall be recognized as an associate company with respect to another company which has at least 20% voting power or control or participation in business decisions and also includes joint control arrangement between the parties with respect to rights and assets of the associate company.
- Section 26: Prospectus of the company must state information and set out financial reports as specified by Securities Exchange Board of India.
- Section 54: Issue of sweat equity shares is no longer limited to the elapse of 1 year from the date of commencement of the business of the company.
- Section 77: Duty to register charges shall not apply with respect of the charges, prescribed in consultation with the Reserve Bank of India.
- Section 89: The declaration in respect of beneficial interest in any share can be filed even after the lapse of the time period indicated (30 days) with the payment of additional fees without being barred by the final limitation of 270 days.
- Section 92: The Annual return can be filed even after the lapse of the time period indicated (60 days) with the payment of additional fees without being barred by the final limitation of 270 days.
- Section 117: The resolution and agreements can be filed even after the lapse of the time period indicated (30 days) with the payment of additional fees without being barred by the final limitation of 270 days. Non- filing of the same will entail minimum penalty of INR 100,000 (USD 1472 approx.) and any company official including liquidator shall be subject to a minimum fine of INR 50,000 (USD 736 approx.)
Resolutions passed by a company according consent to the exercise by its Board of Directors are exempted from filing.
Banking Companies are not required to file resolution with respect to grant of loans, giving of guarantees or providing of security with respect of loans.
- Section 121: The report of the annual general meeting can be filed even after the lapse of the time period indicated (30 days) with the payment of additional fees without being barred by the final limitation of 270 days.
- Section 129: The Companies having one or more subsidiary or associate companies shall 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 to be laid before the annual general meeting of the company. Additionally, a separate statement containing the salient features of the financial statement of subsidiary or subsidiaries and associate company or companies in such form as may be prescribed is to be provided by the Company.
- Section 137: The copy of the financial statements, including consolidated financial statement can be filed even after the lapse of the time period indicated (30 days) with the payment of additional fees without being barred by the final limitation of 270 days.
- Section 139: The appointment of auditors shall not be subject to ratification by members at every annual general meeting anymore.
- Section 157: The details of the Director Identification Number of all its directors can be filed even after the lapse of the time period indicated (15 days) with the payment of additional fees without being barred by the final limitation of 270 days.
- Section 164: The Director appointed in defaulting Company shall not be disqualified for 6 months from such appointment.
Disqualification to be appointed as Director shall continue to apply even if the appeal or petition has been filed against the order of conviction or disqualification
- Section 167: The Director of the defaulting company in terms of non-filing of financial statement or failure to pay debts shall cease to be the Director of all other companies except such defaulting Company.
- Section 168: Now it is optional for the Directors to submit a copy of their resignation to the Registrar within thirty days of the said resignation.
- Section 173: Any Director can participate through video conferencing or other audio visual means in any meeting on any matter.
- Section 177: Recommendations regarding unapproved transactions by the Audit Committee except those covered under related party transactions (Section 188).
The transaction between related parties being more than INR 100,000,000 (USD 1472000 approx.) shall be voidable at the option of the Audit Committee if the same has been done without its approval or has not been ratified by it within 3 months.
- Section 178: The Nomination & Remuneration Committee shall specify the manner for effective evaluation of performance of Board, committees and individual directors.
The Board report shall comprise of the salient features of the policy and the changes therein.
- Section 185: Loan or guarantee in respect of the same shall not be permissible to a Director of the company or holding company.
Loans may be permissible only when a special resolution is passed in the said regard along with an explanatory statement disclosing full particulars of the said loan which are to be utilized for principal business activities.
The revised section procedure for issuance of such loans and penalties in contravention of the provisions so laid down which extends to imprisonment for upto 6 months or fine upto INR 250,000 (USD 3680 approx.)
- Section 186: Provisions of this section shall not be applicable where the loan/ security is provided by a company to its wholly owned subsidiary or joint venture or acquisition is made by the holding company. This Section shall not be applicable with respect 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.
- Section 403: The time period required for the submission of the documents under the Companies Act along with additional fees has been done away with.