THE COMPANIES (AMENDMENT) BILL, 2014 passed in Lok Sabha

STATEMENT OF
OBJECTS AND REASONS

 

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 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 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.
 
The Bill seeks
to achieve the above objectives.
 
 
 NEW DELHI;                                                                           ARUN JAITLEY
 
The 8th December, 2014

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