The Companies Amendment Bill,2016 [Bill 73 Of 2016]- A Review Part-1

Sl.

Section(s) under the CA,

Clause No. in the

Proposed amendment relating to

Remarks/Comments/penalty

2013, amended/Altered

No.

Amendment bill

/Inserted

Amendment to Section 2

(6)-Associate Company- Inclusion of an explanation to the

Amendment/inclusion

to

(6), (28), (30), (41), (46),

1.

2

definitions of associate company, to include the basis of

remove ambiguity.

(49), (51), (57), (71), (76),

control for joint venture.

(85), (87), (91)

(6)-Associate Company- Inclusion of an explanation to the

Amendment/inclusion

to

definitions of associate company, to include the basis of

remove ambiguity.

control for joint venture.

(30)-Debentures- Inclusion of proviso to the debentures

Exemption  proposed  to

be

definition,  so  as  not  to  term  certain  instruments  as

given to some companies

debentures, i.e., instruments under CH-III-D of the RBI act,

and other instruments as may be prescribed by the CG in

consultation with RBI.

(41)- Financial Year- inclusion of the word associate company

Amendment/inclusion

to

in the proviso to the financial year definition to make an

remove ambiguity.

application to the Tribunal to follow different financial year,

than of the other associate company/holding/subsidiary

company, for the sake of consolidation of a/cs

(46)- Holding Company – inclusion of a proviso stating that for

Amendment/inclusion

to

this clause, “Company” includes any Body Corporate.

remove ambiguity.

(47) – The definition interested director omitted

(51)-KMP- inclusion of clause expanding the scope of officers

Expanding  the

scope

of

under the definition of key managerial personnel, (Officers

applicability,  for

ease

of

under full time employment, not more than 1 level below the

operations and also to fix up

directors, and designated as KMP by the Board.)

responsibilities.

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Section(s) under the CA,

Clause No. in the

Proposed amendment relating to

Remarks/Comments/penalty

2013, amended/Altered

No.

Amendment bill

/Inserted

(57)-Networth-inclusion to the definition of net worth, so as

Amendment/inclusion

to

to include the debit and credit balances of P&L account.

remove ambiguity.

(71) – Public Company – punctuation correction to the

Amendment/inclusion

to

definition of Public Company.

remove ambiguity.

(76)-related party – expanding the scope of related party

Expanding

the

scope

of

under the head “body corporate”, an investing company or

applicability

the venturer of the company.

(85)-Small Company- The maximum prescribed limit of paid-

Expanding

the

scope

of

up capital stands increased from Rs. 5 crores to Rs.10 Crores.

applicability. Cushion to Govt to

prescribe the limit upto Rs. 10

Change in the wordings as to the P&L account requirement.

crores.

i.e., “last P&L account” to “P&L of immediately preceding FY”

The turnover to be prescribed by the govt, is proposed to be

Amendment/inclusion

to

increased from 20 crores to 100 crores.

remove ambiguity. Expanding

the  scope

of

applicability.

Cushion to Govt to prescribe

the turnover limit upto Rs. 100

crores.

(87)- subsidiary company- amendment to alter the holding of

Amendment

as

to  basis

of

more than 51 % in the “voting power” rather than “total share

s u b s i d i a r y,

f r o m  a s

a

capital”.

percentage of share capital to

“voting power”

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Section(s) under the CA,

Clause No. in the

Proposed amendment relating to

Remarks/Comments/penalty

2013, amended/Altered

No.

Amendment bill

/Inserted

To omit the proviso to the definition. Proviso not notified till

now.

To omit explanation (d) regarding “Layer”.

(91)-turnover- a new definition substituting the existing

Amendment/inclusion  to

definition.

remove ambiguity of the earlier

turnover definition.

2.

Amendment to section 3.

3

A new Section 3(A) is proposed in connection with, if the

New provision to fix liability on

minimum number of members are reduced in a Public

the members of for the debts by

Company/Private Company to what is prescribed under the

non-complying companies.

Act i.e., 7 & 2 respectively, and the company carries on the

business for a period of more than 6 months, then for the

debts for the said period, the said members shall be severally

liable and they may be sued severally.

3.

Amendment to Section 4

4

Amendment of Section 4(1)(c) to allow companies an

Welcome amendment.

(Memorandum)

unrestricted object clause, to engage in any lawful act or

activity, rather than fixed objects.

Amendment to Section 4(5) as to the validity of the name

The same is not welcome, as

from 60 days to 20 days, from the date of allotment

the period is too short.

Insertion of new sub-sections (6A) and (6B) regarding the

Will  result  in  creation  of

model Memorandum of Association.

u n i f o r m i t y  i n  t h e

documentation.

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Section(s) under the CA,

Clause No. in the

Proposed amendment relating to

Remarks/Comments/penalty

2013, amended/Altered

No.

Amendment bill

/Inserted

4.

Amendment to Section 7-

5

Amendment to Section 7(1)(c) in connection with the

Will result in simplification of

Incorporation of Company

requirement for incorporation of a company. To replace the

the incorporation process.

obtaining of affidavit from subscribers and directors and to

replace the same with declarations from them with reference

to incorporation of company.

5.

Section 12-

6

Amendment of Section 12 (1) as to requirement of having

W e l c o m e  a m e n d m e n t

Registered office

Registered  office  by  a  company  within  30  days  of

increasing the time lines for

incorporation from the present 15 days.

intimation to ROC.

Amendment of Section 12 (4) as to increase of time frame

within which the change in registered office to be intimated to

ROC, increased from 15 days to 30 days.

6.

Section 21-Authentication

7

Amendment to include even an employee of the company to

W i l l  r e s u l t  i n  e a s e

o f

of documents

authenticate the documents for and on behalf of the Board, in

operations.

addition to KMP and other officer.

7.

Section – 26 – Matters to

8

Omission of sub-clauses (a) & (b) of Section 26(1), and

Probably  simplification

of

be disclosed in prospectus

inclusion of new clause in its place, in connection with the

information/Data.

contents of the prospectus with respect to information and

reports on financial information. Post the amendment, the

information shall be in such manner, as specified by SEBI in

consultation with Central Government.

Further,  amendment  also  provides  that  till  the  new

requirements are specified by SEBI, the existing requirements

as per SEBI act, shall apply.

Sl.

Section(s) under the CA,

Clause No. in the

Proposed amendment relating to

Remarks/Comments/penalty

2013, amended/Altered

No.

Amendment bill

/Inserted

8.

Section 35- Civil Liability

9

New Clause- Insertion to include a sub-clause to hold experts

Burden on professionals to be

liable for their statements made by them forming part of the

more  cautious  while  giving

for  mis-statement  in

prospectus, and to provide immunity to Directors from

statements  /certifications  in

prospectus.

liability, as the directors had relied on the statements made

prospectus.

by the experts, and do not result in misstatement by director

himself.

9.

Section  42  –  Private

10

Replacement with new section

Placement

Offer letter to be issued to selected persons, not exceeding 50

Compliance will become very

or such high number as may be prescribed, in a financial year,

complicated.

whose names are to be recorded by the Board.

Private placement offer does not carry renunciation right.

Offer to more than the prescribed number will amount to

public offer and compliance of section 23 is to be done.

Amounts to be received through Cheque/DD or other normal

Banking channels.

Allotment to be done within 60 days from the receipt of

money, and filing to be completed with in 15 days of allotment

and only after that monies can be used.

If return not filed with ROC with 15 days, then the Company,

the promoters, Directors shall be liable for penalty of

Rs.2,000/- for each day, during which the default continues

but not exceeding Rs.25,00,000/-, for each default.

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Section(s) under the CA,

Clause No. in the

Proposed amendment relating to

Remarks/Comments/penalty

2013, amended/Altered

No.

Amendment bill

/Inserted

If, allotment not in compliance with the provisions, then the

Company, the promoters, Directors shall be liable for penalty

of equalling to amounts raised or Rs.2 Crores which ever is

lower. Company to refund the amounts with in 30 days of the

order imposing the penalty.

Any offer not made in compliance with the provisions of the

Section shall be deemed to be public offer and all the

provisions of SCRA & SEBI Act, shall be applicable.

10.

Section  –  47  –  Voting

11

Amendment  as  to  inclusion  of  section  188(1),  in  the

Amendment/inclusion to

Rights

restriction of voting rights, in addition to the existing Section

remove ambiguity.

43 and Section 50.

11.

Section  – 53 – Issue of

12

Amendment of a grammatical error.

Shares at Discount

Insertion of a new Sub-section 2(A) permitting issue of shares at a

Welcome amendment.

discount to creditors pursuant to settlement/restructuring scheme

under directions/regulations specified by RBI under RBI Act or the

Banking regulation Act.

12.

Section – 54 – Issue of

13

Deletion of Section 54 (1) (c), the requirement being  the

W e l c o m e  a m e n d m e n t ,

Sweat Equity Shares

company  could  issue  sweat  equity  shares  only  after

relaxing

the period, thereby

completion of 1 year from the date the company was eligible

allowing

the

companies  to

to commence business

issue  sweat

equity  shares,

without

any

limitation  of

period.

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Section(s) under the CA,

Clause No. in the

Proposed amendment relating to

Remarks/Comments/penalty

2013, amended/Altered

No.

Amendment bill

/Inserted

13.

Section – 62 – Further

14

Section 62(1) (c), is proposed to be amended to include the

Welcome amendment.

issue of Share Capital

compliance of the Chapter III i.e., Section 42 and such other

conditions as may be prescribed.

Insertion as to the mode of dispatch ofRights issue offer letter.

“Courier or any other mode having proof of delivery”, is

proposed to be included.

14.

Section 73 – Deposits

15

Amendment to increase the amounts to be deposited in the

Welcome amendment in the

deposit repayment reserve account, from 15 % to 20 % of the

interest of the depositors.

deposits  maturing  during  the  following  financial  year.

Amount to be deposited on or before 30 of April each year.

Omission as to requirement of deposit insurance.

Amendment of one of the condition to accept deposits, as to

stricter certification from the company side that it has not

committed any default in repayment of deposits and where

defaults have taken place, the company has made good the

default, and a period of 5 years has lapsed since the date of

making good the default.

15

Section 74- Repayment of

Amendment as to the term of repayment of deposits

Relief to some companies, who

Deposits accepted before

16

accepted under the old act, from 1 year to 3 years of the

had obtained deposits under

commencement  of  the

commencement of the new act or on or before expiry of the

the old act.

Act

period for which the deposits were accepted, whichever is

earlier.

Sl.

Section(s) under the CA,

Clause No. in the

Proposed amendment relating to

Remarks/Comments/penalty

2013, amended/Altered

No.

Amendment bill

/Inserted

16.

S e c t i o n

7 6  A

–

17

Amendment as to the increase of the minimum fine on the

Welcome amendment in the

Punishment

company for non-compliance of the deposit rules either at

interest of the depositors.

for contravention

the time of taking the deposit or its repayment, then the

of section 73 or

minimum fine shall be Rs. 1 Crore or two times of the deposit

section 76.

accepted, whichever is lower, and the maximum fee Rs.10

Crores.

17.

Section 77

–

Duty

to

18

Insertion of a new proviso after the existing 3rd proviso to

Welcome amendment.

Register Charges

Section 77 (1), providing non-applicability of the section for

some charges, as may be prescribed in consultation with RBI.

18.

S e c t i o n

7 8

–

19

Amendment of the section in line with Section 77, to include

No comment

A p p l i c a t i o n  f o r

the period of filing of 30 days.

registration of Charge

19.

S e c t i o n

–

8 2

–

20

Amendment to provide time lines for filing of satisfaction of

W e l c o m e  a m e n d m e n t ,

Satisfaction of Charge

Charge by the Company or Charge holder with in a period of

because,  now,  we  need  to

300 days of satisfaction of the charge, and upon payment of

approach for condonation if

additional fees, as may be prescribed.

delayed more than 30 days.

20.

Section 89 – Beneficial

21

Insertion of a new Sub-section (10), to section 89 which

Welcome amendment defining

interest

defines the term “beneficial interest” for the purposes of

the term, thereby making it

Section 89 and Section 90.

more clear.

21.

S e c t i o n

9 0

–

The existing Section 90 to be substituted with a new section

Welcome amendment in order to

I n v e s t i g a t i o n

o f

22

and in a much more detailed way detailing who has to give

have a control as to who are the

beneficial ownership of

notice of having beneficial ownership and who is not

real owners of the company, and

shares in certain cases.

required,  maintenance of register and other incidental

who are acting/representing them

matters, and the heading of the Section  to be renamed as

in disguise and the reason for the

“Register of significant beneficial owners in a company”.

same.

Sl.

Section(s) under the CA,

Clause No. in the

Proposed amendment relating to

Remarks/Comments/penalty

2013, amended/Altered

No.

Amendment bill

/Inserted

22.

Section  92  –  Annual

23

Omission of provisions relating to

Welcome amendment, since, it

Return

will  reduce

the  time  of

(i) information as to indebtedness of the company.

p r e p a r i n g

d u p l i c a t e

(ii) Names, address and other details of the FII.

documents.

CG to prescribe Abridged form of Annual Return to OPC and

small company.

Annual Return need not be part of the Board Report, but the

same shall be placed in the website of the company, if any, and

a web-link to be provided in the Board’s Report.

23.

Section 93 – Filing of

24

The section is proposed to be omitted, and accordingly, the

Welcome change. Because the

return with ROC in case

requirement of filing MGT-10, by a listed company, whenever,

company any how files return

of change in promoters

there is  increase or decrease of 2 % or more in the

to Stock Exchanges.

stake

shareholding position of promoters and top ten shareholders

of the company in each case, will no longer be required.

24.

Section 94

25

Omission of the requirement that prior intimation/service of

Welcome amendment in the

the Special resolution to keep the registers or copies of return

interest of company operations

is to be given.

and ease of doing business.

Insertion of a proviso that Government may prescribe that

certain registers, index, return shall not be available for

inspection or copies of the same can be obtained.

Sl.

Section(s) under the CA,

Clause No. in the

Proposed amendment relating to

Remarks/Comments/penalty

2013, amended/Altered

No.

Amendment bill

/Inserted

25.

Section  96

–  Annual

26

Insertion of proviso enabling unlisted companies to hold their

Welcome amendment.

General Meeting

AGM any place in India, subject to consent in writing or

through electronic mode from all the members in advance.

26.

Section 100 – Calling of

27

Pursuant  to  rule  18  of  Companies  (Management  and

Welcome amendment in view

Extra-Ordinary General

Administration Rules), 2014, EGM of a company can be held

of  the  practical  difficulties

Meetings

only India.

faced by the companies.

The proposed amendment provides that EGM of a Company

other than a WOS of a company incorporated out side India,

shall be held in India i.e., EGM of WOS of a company

incorporated out side India, can take place outside India.

27.

Section 101 – Notice of

28

Insertion of a proviso relating to hold of AGM & EGM at

Removal of ambiguity as in the

meeting

shorter  Notice  after  obtaining  consent  from  95  %

principal  act,  there  was  no

shareholders, entitled to vote at the meeting in case of

mention as to AGM or EGM, but

company having capital and in case of no share capital then

only as GM

with the consent of the members holding not less than 95 % of

the voting power.

28.

Section  110-

Postal

29

Insertion of a Proviso to Section 110 (1) to conduct the

Welcome amendment.  It will

Ballot

meeting in the form of a general meeting and not by postal

reduce  the  expenditure  and

ballot, and pass the resolutions through electronic voting.

waste of stationery.

29.

S e c t i o n

1 1 7  –

30

Amendment (reduction) of the minimum penalty for non

Welcome amendment.

R e s o l u t i o n s

a n d

filing of resolutions with ROC:

agreements to be filed

On the company: from Rs.5 Lakhs to Rs.1 Lakh

Every Officer: From Rs.1 Lakh to Rs.50,000/-.

Sl.

Section(s) under the CA,

Clause No. in the

Proposed amendment relating to

Remarks/Comments/penalty

2013, amended/Altered

No.

Amendment bill

/Inserted

The requirement of filing of various resolutions that are

Reduction in filings.

required to be done have been omitted, except for voluntary

winding up petition and resolutions passed under Section

179(3) (which any how is not applicable to private companies

pursuant to the exemption notification Dt:05.06.2015)

Insertion of a proviso that the clause shall not be apply to a

resolution passed by Banking company for grant of loans or

providing security, in its ordinary course of business.