The Government enforced the Companies Act, 2013 (hereinafter referred to as "Companies Act") for the purpose of regulation of the affairs of the company in a smooth and efficient manner. However, the Companies (Amendment) Act, 2017, (hereinafter referred to as "Amendment Act") was passed on January 3, 2018, to further amend the provisions of the Companies Act.
- A recent notification by the Ministry of Corporate Affairs dated July 31, 2018, has effectuated the provisions of Section 36 of the Amendment Act whereby amendment has been brought to Section 134 of the Companies Act dealing with Financial statement, Board‘s Report, etc. The amendments to this section are as follows:
- Where one of the persons authorizing the chairperson of the company to sign the financial statement is the Chief Executive Officer, he may not necessarily be the director of the same. [Section 134(1)].
- The report by the Board of Directors to be laid before in a company general meeting shall include the web address (instead of its extracts), if any, where annual return referred to in sub-section (3) of section 92 has been placed. [Section 134(3)(a)].
- The report by the Board of Directors to be laid before in a company general meeting shall include, 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 evaluation of the performance of the Board, its Committees and of individual directors has been made. Section 134(3)(p)].
- The report by the Board of Directors to be laid before in a company general meeting shall include such other matters as may be prescribed. "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 Section 134(3)(e) (company is covered under defects in appointment of directors) or clause Section 134(3)(o) (the details about corporate social responsibility) 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.
- A new provision, Section 134(3A) has been introduced which states that the Central Government may prescribe an abridged Board's report, for the purpose of compliance with this section by One Person Company or small company.
- Another notification dated August 7, 2018, issued by the Ministry of Corporate Affairs allowed the provisions of Section 10 of the Amendment Act to come into force. The said section has substituted Section 42 of the Act which deals with offer or invitation for subscription of securities on private placement in the below stated manner-
- A company may, subject to the provisions of this section, make a private placement of securities.
- 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 sub-section (1) of section 62], in a financial year subject to such conditions as may be prescribed.
- 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 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
- Every identified person willing to subscribe to the private placement issue shall apply in the private placement and application issued to such person along with 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).
- 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 sub-section (2), a company may, at any time, make more than one issue of securities to such class of identified persons as may be prescribed.
- 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.
- (No company issuing securities under this section shall release any public advertisements or utilise any media, marketing or distribution channels or agents to inform the public at large about such an issue.
- 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.
- 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.
- 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.
- Notwithstanding anything contained in sub-section (9) and sub-section (10), any private placement issue not made in compliance of the provisions of sub-section (2) shall be deemed to be a public offer and all the provisions of this Act and the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange Board of India Act, 1992 shall be applicable.’