Companies Amendment
Bill, 2016 (the bill) was introduced in Lok Sabha on 16th March, 2016. Most of the amendments
proposed in bill are broadly aimed at addressing difficulties in implementation
of provisions of Companies Act, 2013.
Key amendments proposed
in the bill are as follows:
1) Appointment of auditors: It
has been proposed to do away with the requirements of annual ratification by
members with respect to appointment of auditors. Further, under the exisitng
provisions, the auditor who has resigned from the company needs to file Form
No. ADT-3 with the company and ROC. His failure to do so may attract maximum
penalty of Rs 5 lakhs. Now it has been proposed to reduce such penalty to Rs
50,000. However, such penalty should not exceed the remuneration of auditor.
2) Prohibition on loan or guarantee: Bill
seeks to limit the prohibition on loans, advances, etc., to any person in which
any of the director is interested in. It has been proposed to allow companies
to give loan's or guarantee's or provide security to any person in whom any of
the director is interested in subject to passing of special resolution by the
company and utilisation of loans by the borrower for its principal business
activities.
3) Restrictions on layers of investment companies: Under the existing provisions a
company shall make investment through not more than two layers of investment
companies. The Bill proposes to delete the restrictions on layers of
investments.
4) Managerial remuneration: It
has been proposed to do away with requirement of obtaining special resolution
and approval of Central Govt. for payment of managerial remuneration in excess
of prescribed limits of Schedule V. However, for making such payments prior
approval of bank or public financial institution or non-convertible debenture
holder or secured creditor is also required before taking approval from
shareholders.
5) DIN: It has been
proposed to recognise any other identification number, as may be prescribed, in
place of DIN.
6) Repayment of deposit: Under the exising provisions, pubic deposits
shall be repaid within one year from commencement of the Companies Act, 2013 or
from due date of payment, whichever is earlier. Now the bill proposes to provide
that such public deposits shall be repaid within 3 years from the enforcement
of Section 74 (Repayment of deposit etc., accepted before commencement of the
Act) of the Companies Act, 2013 or before expiry of the period for which
deposits were accepted, whichever is earlier.
7) Simplification of private placement: Bill
proposes to simplify the requirements with reference to private placements,
such as doing away with separate offer letter, reducing number of filings with
registrar.
8) Liberty on public issue: Bill
proposes to remove the restriction which requires company to make issue only
after one year has elapsed from the date of commencement of its business.
9) Annual Return: Bill
proposes to remove the extract of annual return forming part of Board's report
and provide disclosure of web address/web-link of the annual return in Board's
report. It also proposes to omit requirement regarding disclosure of
indebtedness, and modify requirement of disclosure of names, addresses,
countries of incorporation, registration and percentage of shareholding of
Foreign Institutional Investors.
10) Maintenance
of registered office: Under
the existing provisions, the company has to maintain its registered office
within 15 days of its incorporation. The bill proposed to provide that a
company to has to maintain its registered office within 30 days of
incorporation.
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