Companies Amendment Bill 2016- part 2

Contributed by CS DVK Phanindar

Sl.

Section(s) under the CA,

Clause No. in the

Proposed amendment relating to

Remarks/Comments/Penalty

No.

2013, amended

Amendment Bill

30.

Section 123

31

Substitution  of  sub-section  (3)of  Section  123  to  allow

Welcome  amendment,  as  it

Declaration of Dividend

declaration and payment of interim dividend, during the

allows  a  new  criteria  for

period from closure of financial year till date of Annual

declaration of Interim Dividend,

General Meeting for a financial year, and out of the profits of

and  clarity  on  the  rate  of

the said year; or from the surplus in the profit and loss

dividend  in  the  absence  of

account; or out of profits generated in the financial year till

profits.

the quarter preceding the date of declaration of the interim

dividend.

In addition to the above, the substitution also prescribes the

rate at which the interim dividend can be declared, in case of

loss is incurred during the financial year.

31.

Section  129  -Financial

32

Substitution of sub-section (3) of section 129, in connection

Amendment/inclusion to

Statements

with preparation of Consolidated Financial Statements in the

remove ambiguity.

same form and manner as that of its own in accordance with

applicable accounting standards, for associate companies

also in addition to subsidiary.

Sl.

Section(s) under the CA,

Clause No. in the

Proposed amendment relating to

Remarks/Comments/Penalty

No.

2013, amended

Amendment Bill

32.

Section – 130 –

Accounts

33

Amendment to sub-section (1) of Section  130, so as to

Welcome amendment, as there

Re-opening

of

provide that in addition to authorities already specified in the

is  a  increased  scope  of

on Court’s

or

Tribunal’s

section, any other person concerned shall be given notice

authorities, to whom notice as

Orders (Section notified

before passing an order for re-opening of accounts.

to re-opening of accounts is to

w i t h  e f f e c t  f r o m

be given by the Tribunal; and

01.06.2016)

Insertion of a new sub-section (3) to provide that no order

also  giving  the  periods  for

shall be made for re-opening of books of account relating to a

which order can be given by

period  earlier  than  eight  financial  years  immediately

Tribunal,  for  re-opening  of

preceding the current financial year, unless there is a specific

accounts.

direction under section 128(5) [i.e., maintenance of books of

accounts] from the Central Government for longer period.

33.

Section 132- Constitution

34

Amendment (reduction) of the minimum penalty that can be

Welcome amendment.

of  National

Financial

levied by way of an order by NFRA on CA Firms, if professional

Reporting

Authority

or other misconduct is proved from Rs. 10 Lakhs to Rs.5 Lakhs.

(NFRA). (Section yet to

be notified)

34.

Section 134

–

Financial

35

Substitution of sub- section (1)of section 134, with a new

Welcome amendment as the

statements

&  Board

section, thereby removing the requirement that the CEO signing

proposed amendments reduce

Report

the financials shall be a Director, and accordingly, a CEO shall

the reporting requirements in

now sign financial statements irrespective of whether he is a

the Board Report.

director or not.

Amendments to sub-section (3) of section 134 seeks to modify

the disclosure requirements with respect to (a) removal of the

requirement of attaching the extract of annual return to the

Board report, and just mentioning the web-address, if any,

where the extract of annual return is placed is to be mentioned

Sl.

Section(s) under the CA,

Clause No. in the

Proposed amendment relating to

Remarks/Comments/Penalty

No.

2013, amended

Amendment Bill

(b)amendment to clause (p) of the sub-section relating to

statement  on  annual  performance  of  the  Board,  its

committees and independent directors by the companies to

which the provision is applicable(c)mentioning only the salient

features of the Remuneration and nomination policy (Section

178) and CSR policy( Section 135) in the Board Report, and

providing the web-address where  the complete policy is

available.

Insertion of a new section 3A, which empowers the Central

Government to prescribeabridged Board’s report for small

company and one person company.

35.

Section – 135 – Corporate

36

Amendment to sub-section (1) of section 135,with regard to

Amendment  to

remove

Social Responsibility.

the period for which the criteria for applicability of CSR to a

ambiguity  and

ease  of

Company (i.e., Turnover, Net worth & Net Profit) are to be seen

operations.

from “any financialyear” to “immediately preceding financial

year”.

Insertion of a proviso to sub-section (1) regarding composition

of CSRcommittee with two or more directors, by a company

which is not required to appointindependent director under

section 149.

Amendment of Clause (a)  in sub-section (3) with regard to

areas in which CSR activity can be undertaken “as specified in

Schedule VII”, the words and figures “in areas or subject,

specified in Schedule VII”, thereby providing more scope in

the CSR activities.

Sl.

Section(s) under the CA,

Clause No. in the

Proposed amendment relating to

Remarks/Comments/Penalty

No.

2013, amended

Amendment Bill

Amendment to the explanation given in sub-section (5) earlier

with regard to “Average Net profit”, now changed to “Net

profit”, and further to empower the CentralGovernment to

prescribe sums which shall not be included for calculating ‘net

profit’ of a Company for the purpose of section 135.

36.

Section  – 136 – Right of

37

Amendment to sub-section (1) of section 136 by inserting a new

Welcome amendment.

member

to  copies  of

proviso to provide that copies of audited financial statements

a u d i t e d

f i n a n c i a l

and other documents can be sent at shorter notice if 95 % of

statement.

members entitled to vote at the meeting agree for the same;

and  accordingly  aligning  the  existing  provisos,  after  the

insertion.

Substituting the existing 4th proviso to Sub-section (1) with new

proviso,   to rationalise the requirements with respect to

financial statements of foreign subsidiaries of a listed company

subject to conditions.

Insertion of a proviso to Sub-section (2) thereby companies

having subsidiaries to provide financials of the subsidiary for

inspection by the member who asks for it.

37.

Section  –  137  –  Copy

38

Insertion of a new proviso after the existing 4th proviso to sub-

Welcome amendment.

section (1)   so as to enable filing of unaudited financial

offinancialstatement

tobe filed with

statements by listed companies, of their foreign subsidiaries

Registrar.

which is not required to get its accounts audited, under the laws

of the country of incorporation.  The filing of unaudited

financial statements are to be accompanied by a declaration by

the listed company, to the above effect.

Sl.

Section(s) under the CA,

Clause No. in the

Proposed amendment relating to

Remarks/Comments/Penalty

No.

2013, amended

Amendment Bill

38.

S e c t i o n

–

1 3 9

–

39

Omission  of  the  first  proviso  to  sub-section  (1),  i.e.,

Welcome amendment.

Appointment of Auditors

ratification of the appointment of auditors by the members at

every AGM.

39.

S e c t i o n

–

1 4 0

–

40

Amendment to sub-section (3) of section 140 to reduce the

penalty/penalty  criteria,  withrespect  to  failure  to  file

Removal,resignation

of

auditor and giving of

resignation form (ADT-3) by auditor to the Registrar concerned

Specialnotice

and also to the Comptroller and Auditor General (CAG) for the

applicable companies, from  the existing  “Rs.50,000/-“ to

“Rs.50,000/-or  the remuneration of auditors whichever is

less”.

40.

Section – 141 – Eligibility,

41

Insertion of an explanation to clause (d) of sub-section (3) of

Amendment to remove

section 141, to clarify the meaning of relative with reference to

Qualifications and

eligibility for appointment of auditors.

ambiguity.

disqualifications of

auditors.

Substitution of the existing clause (i) of sub-section (3) along

with explanation, for harmonisation with section 144 in respect

of providing of certain non-audit services to holding or

subsidiary company of a company.

41.

Section 143 – Powers and

42

Amendment to sub-section (1) of section 143 of the Act to

Amendment to remove

include   associate  companies  in  addition  to  subsidiary

ambiguity.

duties  of

auditors  and

companies with respect to right of auditors to have access to

auditing standards.

accounts and records for the purpose of consolidation.

Amendment to clause (i) of sub-section (3) to provide that

auditors shall report on internal financial control systems

relating to financial statements.

Amendment to sub-section (14) to replace the term “cost

accountant in practice” with “cost accountant”.

Sl.

Section(s) under the CA,

Clause No. in the

Proposed amendment relating to

Remarks/Comments/Penalty

No.

2013, amended

Amendment Bill

43

Section 148 – Central

44

Amendment to substitute the words ‘cost accountant in

Amendment to remove

Government to specify

practice’ with the words ‘cost accountant’ in sub-section (3)

ambiguity.

audit of items of cost in

& (5) of Section 148 and also to substitute the words ‘Institute

respect of certain

of Cost and Works Accountants of India’ with the words

companies.

‘Institute of Cost Accountants of India’,in the explanation to

Sub-section (3) of Section 148.

44

Section 149 –

45

Amendment to Sub-section (3) of Section 149, relating to the

Welcome  Amendment  to

requirement of resident director, the amendment proposed

remove ambiguity and ease of

requires that “every company shall have at least one director

operations.

who stays in India for a total period of not less than 182 days

during the financial year”instead of the existing requirement

of “shall have at least one director who has stayed in India for

a total period of not less than 182 days in the previous

calendar year.”

Further the amendment proposes 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.

Amendment to clauses in sub-section (6) of Section 149, to

specify limits with respect to pecuniary relationship of a

director with respect to eligibility of a director to be appointed

as an independent director. It also seeks to specify the scope of

restriction on pecuniary relationship entered into by a relative.