SUMMARY OF AMENDMENTS
2 June 2015
1. In the Definition of Private Company, the minimum requirement of Rs. 1 lac paid up share capital has been dispensed with. Thus, now there shall be no minimum requirement of paid up share capital for a Private Company. 2. In the Definition of Public Company, the minimum requirement of Rs. 5 lac paid up capital has been dispensed with. Thus, now there shall be no minimum requirement of paid up capital for a Public Company. 3. In some of the provisions of the Companies Act, the requirements as to the common seal of the company is either dispensed with or is made optional. In following sections, amendment has been made: i) In Section 9 and Section 22 (3), the requirement of common seal of the company is dispensed with. ii) In Section 12 (3) (b), Section 22(2), Section 46 (1) Section 223 (4)(a), the requirement of the common seal of the company is made optional. 4. Section 11 of the Companies Act, which deals with deals “Commencement of business” is omitted. 5. New Section 76A with title “Punishment for contravention of Section 73 and Section 76” is inserted. Thus, where a company contravenes the provisions of Section 73 or Section 76, then a company shall be punishable with fine, which shall not be less than Rs. 1 Crore but which may extend to ten crore rupees. In addition to this, every officer of the company who is in default, shall be punishable with imprisonment upto seven years or with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees, or with both. 6. New Proviso to Section 117(3)(g) is inserted. Thus, in view of the new proviso, a person shall not be entitled under section 399 to inspect or obtain copies of the following resolutions passed at the Board meetings: (a) to make calls on shareholders in respect of money unpaid on their shares; s (b) to authorize buy-back of securities under section 68; (c) to issue securities, including debentures, whether in or outside India; (d) to borrow monies; (e) to invest the funds of the company; (f) to grant loans or give guarantee or provide security in respect of loans; (g) to approve financial statement and the Board’s report; (h) to diversify the business of the company; (i) to approve amalgamation, merger or reconstruction; (j) to take over a company or acquire a controlling or substantial stake in another company; (k) any other matter which may be prescribed 7. New Proviso to Section 123(1) is inserted. In view of the new proviso, a company can not declare dividend unless carried over previous losses and depreciation, not provided in previous year or years, are set off against profit of the company for the current year. 8. In Section 124(6), the words “dividend has not been paid or claimed for seven consecutive years or more shall be” are substituted in place of words “unpaid or unclaimed dividend has been transferred under sub-section (5) shall also be” are substituted and new explanation is inserted. Thus, in view of the amendment, only those dividend shall be transferred to “Investor Education and Protection Fund”, which has not been paid or claimed for 7 consecutive years or more. Further, as per new explanation, any dividend paid or claimed for any year, during the said period of seven consecutive years, the share shall not be transferred to Investor Education and Protection Fund. 9. In Section 134(3), a new clause (ca) is inserted. In view of new clause inserted, Board’s Report shall also include details in respect of frauds reported by auditors other than those which are reportable to the Central Government. 10. In Section 143, sub-section (12) of the principal Act, is substituted with new sub-section (12). Thus, as per substituted clause, if an auditor of a company has reason to believe that an offence of fraud is committed in the company, the auditor shall report the matter to the Central Government. However, in case of a fraud involving lesser than the specified amount, the auditor shall report the matter to the audit committee or to the Board. Further, the auditors, who have reported frauds to the audit committee or the Board but not reported to the Central Government, shall disclose the details about such frauds in the Board’s report. 11. In Section 177(4)(iv), a new proviso is inserted. Thus, in view of the new proviso, Audit Committee may make omnibus approval for related party transactions proposed to be entered into by the company subject to certain conditions. 12. In Section 185(1), two new clause i.e. (c) & (d) is inserted. Thus, in view of the two new clauses added by the amendment, a company can make following loans or guarantee to its directors: i) any loan made by a holding company to its wholly owned subsidiary company, or any guarantee given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company; or ii) any guarantee given or security provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company: However, as per proviso, the loans made under clauses (c) and (d) are to be utilized by the subsidiary company for its principal business activities. 13. In Section 188 (1) & (3), Ordinary Resolution shall be required in place of Special Resolution. Further, a new proviso is inserted. Thus, in view of amendment in (1) & (3), a company shall require only Ordinary Resolution to be passed in place of Special Resolution for entering in contract or arrangement. Further, a member of the company can not vote on such ordinary resolution, if such member is a related party. Further, as per new proviso i.e. 4th proviso, the requirement of passing the resolution under first proviso shall not be applicable for transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval. 14. In Section 212(6), the words “offence covered under section 447” is substituted in place of the words “the offences covered under sub-sections (5) and (6) of section 7, section 4, section 36, sub-section (1) of section 38, sub-section (5) of section 46, sub-section (7) of section 56, sub-section (10) of section 66, sub-section (5) of section 140, sub-section (4) of section 206, section 213, section 229, sub- section (1) of section 251, sub-section (3) of section 339 and section 448 which attract the punishment for fraud provided in section 447". Thus, as per substitution of words, offence covered under Section 447 has been made cognizable. 15. In Section 248(1), in clause (a), the words “or” is inserted after the word incorporation. Further clause (b) is omitted from the said sub section. Thus, in view of clause (b), which is omitted by amendment, the power of the Registrar to send notice for removal of name of the company from register of companies, in respect of failure of the subscribers to the memorandum to pay their subscription amount within 180 days from date of incorporation, is taken out of the ambit of this section. In other words, it can be said that Registrar can not issued notice for removal of name of the company, where subscribers to the memorandum to fail to pay their subscription amount within 180 days from date of incorporation. 16. In Section 419(4), the words “or winding up” is omitted from the sub section (4). Thus, in view of the amendment, the power of the President for constituting Special Benches in respect of “winding up” of the company has been taken away. 17. In Section 435(1), the words “trial of offence punishable under the Act with imprisonment of two years or more” is substituted in place of the words “trial of offences under this Act” and new proviso is inserted. Thus, Special Court established under the Companies Act, 2013, shall be empowered to hear the cases, where the offences, which are punishable under the Companies Act, 2013 with imprisonment of two years or more. However, as per new proviso, all other offences shall be tried by Metropolitan Magistrate or Judicial Magistrate of the First Class. 18. In Section 436 (1) (a), the words “all offences specified under sub-section (1) of Section 435” is substituted in place of the words “all offences under the Act”. Thus, as per amendment, all offences which are punishable with imprisonment of two years or more under the Companies Act, 2013 shall be triable by the Special Court established for the area in which the registered office of the company in relation to which the offence is committed or where there are more Special Courts than one for such area, by such one of them as may be specified in this behalf by the High Court concerned. 19. In Section 462 (2), the entire sub section (2) is substituted. Thus, as per the amendment, where the Central Government proposed to issue notification, thereby exempting class or classes of companies from the provisions of the Companies Act, 2013, then before issuing such notification, copy of every such notification proposed to be issued, shall be laid in draft before each House of Parliament, while it is in session, for a total period of thirty days, and if, both Houses agree in disapproving the issue of notification, it shall not be issued or both Houses agree in making any modification in the notification, it shall be issued only after such modification as may be agreed upon by both the Houses. Further, in calculating period of thirty days, period during which the House is prorogued or discontinue or adjourned for more than four consecutive days shall not be taken into account. Further, the copies of every such notification issued shall be laid before each House of Parliament after it has been issued.