Companies (Amendment) Bill 2014

Companies (Amendment) Bill 2014 was introduced in lok Sabha by Shri. Arun Jaitley on 08th December 2014 and same been passed by Lok Sabha on 17 December 2014.

Companies Act, 2013 (Act) was notified on 29th August, 2013. Barring provisons relating to Chapters XV to XX and certain other provisions relating to setting up of/exercise of powers by National Company Law Tribunal (NCLT)/National Company Law Appellate Tribunal (NCLAT); Investor Education and Protection Fund (IEPF’); National Financial Reporting Authority (NFRA)

and Special Court, all provisions of the Act have been brought into force with effect from 1 st April, 2014.

After the commencement of provisions of the Act, Government have received representations from various stakeholders (including Industry Chambers, Professional Institutes, Legal Experts and Ministries/Departments) expressing practical difficulties in complying with some of the requirements laid down in the commenced provisions. It was noted that some of the issues raised and suggestions made can be addressed only by way of amendent in the Act and their immediate resolution is also considered to be necessary. Some of the amendments are also required with a view to further facilitate ‘ease of doing business’ and deal with certain difficulties in this behalf brought out by Industry Chambers and other agencies.

The proposed amendments deal with related party transactions, fraud reporting by auditors, public inspection of Board resolutions, responsibilities of audit committee, restrictions on bail, making common seal optional, requirement for minimum paid-up share capital, strength of benches for hearing winding up cases, jurisdiction of special courts to try offences.

Amendments are also being proposed in the Act to incorporate some of the provisions earlier left out inadvertently, setting off of past losses/depreciation before declaring dividend and exemptions for giving of loans/guarantee/security by holding companies to its subsidiaries.

Accordingly, it has been decided to move amendments in the Act through an Amendment Bill. The Bill, namely, the Companies (Amendment) Bill 2014, inter alia, contains the amendments to the Companies Act, 2013 as under:—

(i)    to amend clauses (68), (71) of section 2 and section 11 of the said Act to omit the requirement for minimum paid-up share capital, and consequential changes;

(ii)     to amend sections 9, 12, 22, 46 and 223 of the said Act for making common seal optional, and consequential changes for authorisation for execution of documents;

(iii)      to insert a new section 76A to provide for punishment for deposits accepted in violation of the provisions of the said Act;

(iv)     to amend clause (g) of sub-section (3) of section 117 to prohibit public inspection of Board resolutions filed in the Registry;

(v)     to amend sub-section (1) of section 123 of the said Act to include provisions for writing off past losses/depreciation before declaring dividend for the year;

(vi)     to amend sub-section (6) of section 124 of the said Act for rectifying the requirement of transferring equity shares for which unclaimed/unpaid dividend has been transferred to the Investors Education and Protection Fund even though subsequent dividend(s) has been claimed;

(vii) to amend sub-section (3) of section 134 and sub-section (12) of section 143 of the said Act to incorporate enabling provisions to prescribe thresholds beyond which fraud shall be reported to the Central Government (below the threshold, it will be reported to the Audit Committee). Disclosures for the latter category also to be made in the Board’s Report;

(viii)   to amend clause (iv) of sub-section (4) of section 177 of the said Act to provide provision empowering Audit Committee to give omnibus approvals for related party transactions on annual basis;

(ix) to amend section 185 of the said Act to provide for exemption u/s 185 (Loans to Directors) provided for loans to wholly owned subsidiaries and guarantees/securities on loans taken from banks by subsidiaries;

(x)   to amend sub-section (1) of section 188 of the said Act for replacing ‘special resolution’ with ‘resolution’ for approval of related party transactions by non-related shareholders;

(xi)   to amend sub-section (1) of section 188 of the said Act to exempt related party transactions between holding companies and wholly owned subsidiaries (WOS) from the requirement of approval of non-related shareholders';

(xii)  to amend sub-section (6) of section 212 of the said Act to provide for bail restrictions to apply only for offence relating to fraud u/s 447;

(xiii)   to amend sub-section (4) of section 419 of the said Act to provide for winding up cases to be heard by 2-member Bench instead of a 3-member Bench; and

(xiv) to amend sections 435 and 436 of the said Act to provide for that Special Courts to try only offences carrying imprisonment of two years or more