THE COMPANIES (AMENDMENT) BILL, 2015*
Bill No. 185-C of 2014
A BILL to amend the Companies Act, 2013.
Be it enacted by Parliament in the
Sixty-Sixth Year of the Republic of India as follows:—
Short title and commencement
1. (1) This Act
may be called the Companies (Amendment) Act, 2015.
(2) It shall come into force on such
date as the Central Government may, by notification in the Official Gazette,
appoint and different dates may be appointed for different provisions of this
Act and any reference in any provision to the commencement of this Act shall be
construed as a reference to the coming into force of that provision.
Amendment of section 2
2. In section 2 of
the Companies Act, 2013 (18 of 2013) (hereinafter referred to as the principal
Act),—
(i)
in clause (68), the words “of one lakh rupees or such higher paid-up share
capital” shall be omitted;
(ii)
in clause (71), in sub-clause (b), the words “of five lakh rupees or such
higher paid-up capital,” shall be omitted.
Amendment of section 9
3. In section 9 of
the principal Act, the words “and a common seal” shall be omitted. Omission of
section 11
4. Section 11 of
the Principal Act shall be omitted.
Amendment of section 12
5. In section 12
of the principal Act, in sub-section (3), for clause (b), the following clause
shall be substituted, namely:—
“(b) have its name engraved in legible
characters on its seal, if any;”.
Amendment of section 22
6. In section 22
of the principal Act,—
(i) in sub-section (2),—
(a) for the words “under its common
seal”, the words “under its common seal, if any,” shall be substituted;
(b) the following proviso
shall be inserted, namely:—
“Provided that in case a
company does not have a common seal, the authorisation under this sub-section
shall be made by two directors or by a director and the Company Secretary,
wherever the company has appointed a Company Secretary.”;
(ii) in sub-section (3), the words
”and have the effect as if it were made under its common seal”, shall be
omitted.
Amendment of section 46
7. In section 46
of the principal Act, in sub-section (1), for the words “issued under the
common seal of the company”, the words “issued under the common seal, if any,
of the company or signed by two directors or by a director and the Company
Secretary, wherever the company has appointed a Company Secretary” shall be
substituted.
Insertion of new section 76A
8. After section
76 of the principal Act, the following section shall be inserted, namely: –
“76A. Punishment for contravention
of section 73 or section 76.—Where a company accepts or invites or allows or causes any
other person to accept or invite on its behalf any deposit in contravention of
the manner or the conditions prescribed under section 73 or section 76 or rules
made thereunder or if a company fails to repay the deposit or part thereof or
any interest due thereon within the time specified under section 73 or section
76 or rules made thereunder or such further time as may be allowed by the Tribunal
under section 73,—
(a) the company shall, in
addition to the payment of the amount of deposit or part thereof and the
interest due, be punishable with fine which shall not be less than one crore
rupees but which may extend to ten crore rupees; and
(b)
every officer of the company who is in default shall be punishable with
imprisonment which may extend to 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:
Provided that if it is proved that
the officer of the company who is in default, has contravened such provisions
knowingly or wilfuly with the intention to deceive the company or its
shareholders or depositors or creditors or tax authorities, he shall be liable for
action under section 447.”.
Amendment of section 117
9. In section 117 of the principal
Act, in sub-section (3),—
(i) in clause (g), the word ”and”
occurring at the end shall be omitted;
(ii) after clause (g), the following
proviso shall be inserted, namely:—
“Provided that no person shall be
entitled under section 399 to inspect or obtain copies of such resolutions;
and”.
Amendment of section 123
10. In section 123 of the principal
Act, in sub-section (1), after the third proviso, the following proviso shall
be inserted, namely:—
“Provided also that no company shall
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.”.
Amendment of section 124
11. In section 124 of the principal
Act, in sub-section (6),—
(i) for the words, brackets and
figure “unpaid or unclaimed dividend has been transferred under sub-section (5)
shall also be”, the words “dividend has not been paid or claimed for seven
consecutive years or more shall be” shall be substituted;
(ii) after the proviso, the
following explanation shall be inserted, namely:—
“Explanation. – For the removals of
doubts it is hereby clarified that in case any dividend is 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.”.
Amendment of section 134
12. In
section 134 of the principal Act, in sub-section (3), after clause (c), the
following clause shall be inserted, namely:—
“(ca) details in respect of frauds
reported by auditors under sub-section (12) of section 143 other than those
which are reportable to the Central Government;”.
Amendment of section 143
13. In section 143 of the principal
Act, for sub-section (12), the following sub-section shall be substituted,
namely:—
“(12) Notwithstanding anything
contained in this section, if an auditor of a company in the course of the
performance of his duties as auditor, has reason to believe that an offence of
fraud involving such amount or amounts as may be prescribed, is being or has
been committed in the company by its officers or employees, the auditor shall
report the matter to the Central Government within such time and in such manner
as may be prescribed:
Provided that in case of a fraud
involving lesser than the specified amount, the auditor shall report the matter
to the audit committee constituted under section 177 or to the Board in other
cases within such time and in such manner as may be prescribed:
Provided further that the companies,
whose auditors have reported frauds under this sub-section 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 in such manner as
may be prescribed.”.
Amendment of section 177
14. In
section 177 of the principal Act, in sub-section (4), in clause (iv), the
following proviso shall be inserted, namely:—
“Provided that the Audit Committee
may make omnibus approval for related party transactions proposed to be entered
into by the company subject to such conditions as may be prescribed;”.
Amendment of section 185
15. In section 185 of the
principal Act, in sub-section (1), in the proviso, after clause (b) the following
clauses and proviso shall be inserted, namely:—
“(c) 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
(d) 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:
Provided that the loans made under
clauses (c) and (d) are utiised by the subsidiary company for its principal
business activities.”.
Amendment of section 188
16. In section 188 of the principal
Act, (a) in sub-section (1),—
(i) for the words
“special resolution”, at both the places where they occur, the word “resolution”
shall be substituted;
(ii) after the third proviso, the
following proviso shall be inserted, namely:—
“Provided also that 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.”;
(b) in sub-section (3), for the
words “special resolution”, the word ” resolution” shall be substituted.
Amendment of section 212
17. In
section 212 of the principal Act, in sub-section (6), for the words, brackets
and figures “the offences covered under sub-sections (5) and (6) of section 7,
section 34, 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″,
the words and figures “offence covered under section 447″ shall be substituted.
Amendment of section 223
18. In section 223 of the
principal Act, in sub-section (4), in clause (a), for the words “by the seal”,
the words “by the seal, if any,” shall be substituted.
Amendment of section 248
18A. In section 248 of the principal
Act, in sub-section (1),—
(i)
in clause (a), after the word “incorporation”, the word “or” shall be inserted;
(ii)
clause (b) shall be omitted.
Amendment of section 419
19. In section 419 of the
principal Act, in sub-section (4), the words “or winding up” shall be omitted.
Amendment of section 435
20. If section 435 of the principal
Act, in sub-section (1),—
(i)
for the words “trial of offences under this Act”, the words “trial of offences
punishable under this Act with imprisonment of two years or more” shall be
substituted;
(ii)
the following proviso shall be inserted, namely:—
“Provided that all other offences
shall be tried, as the case may be, by a Metropolitan Magistrate or a Judicial
Magistrate of the First Class having jurisdiction to try any offence under this
Act or under any previous company law.”.
Amendment of section 436
21. In section 436 of the
principal Act, in sub-section (1), in clause (a), for the words “all offences
under this Act”, the words, brackets and figures “all offences specified under
sub-section (1) of section 435″ shall be substituted.
Amendment of section 462
22. In
section 462 of the principal Act, for sub-section (2), the following
sub-sections shall be substituted, namely:—
“(2) A copy of every notification
proposed to be issued under sub-section (1), 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 or both
Houses agree in making any modification in the notification, the notification
shall not be issued or, as the case may be, shall be issued only in such
modified form as may be agreed upon by both the Houses.
(3) In reckoning any such period of
thirty days as is referred to in sub-section (2), no account shall be taken of
any period during which the House referred to in sub-section (2) is prorogued
or adjourned for more than four consecutive days.
(4) The copies of every notification
issued under this section shall, as soon as may be after it has been issued, be
laid before each House of Parliament”.
STATEMENT OF OBJECTS AND REASONS
Companies Act, 2013 (Act) was
notified on 29th August, 2013. Barring provisions 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 1st 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 amendment 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.
The Bill seeks to achieve the above
objectives.
MEMORANDUM REGARDING DELEGATED
LEGISLATION
Clause 13 of the Bill, inter alia,
proposes to substitute sub-section (12) of section 143 of the Companies Act,
2013 so as to confer power upon the Central Government to specify amount of
fraud, beyond which the matter shall be reportable by the auditor to the
Central Government. This clause also empowers Central Government to specify the
manner of reporting to the Central Government or the Audit Committee or Board
as the case may be. Further, this clause also empowers the Central Government
to specify the manner in which the details about such frauds are to be
disclosed in the Board’s report.
Clause 14 of the Bill, inter alia,
proposes to insert a proviso in clause (vi) of sub-section (4) of section 177
of the Companies Act, 2013 so as to confer power upon the Central Government to
specify such conditions with which the Audit Committee may make omnibus
approval for related party transactions.
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