Top 5 Changes in the Companies (Amendment) Act, 2017 (Important) (Download PDF)

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Cabinet approved amendments to the Companies Act, 2013 to ease compliance requirements and certain other provisions to: Remove complexities, Improve ease of doing business, Strengthen corporate governance standards, Prescribe strict action against defaulting companies.

Image of Top 5 changes in the Companies (Amendment) Act, 2017

Image of Top 5 Changes in the Companies (Amendment) Act, 2017

Image of Top 5 changes in the Companies (Amendment) Act, 2017

What are Amendments in the Company Act?

Harmonisation with SEBI and RBI

  • Several provisions have been amended to align the Act with various rules and regulations of the SEBI and the RBI.

  • For instance, Sections 194 and 195 of the Act, which dealt with insider trading and forward dealing, have now been omitted since the SEBI regulations are wide enough to cover all instances of such frauds.

  • Disclosures to be made in the prospectus have also been aligned with the SEBI’s power to regulate IPOs.

  • The definition of ‘debenture’ has also been amended to allow RBI to disqualify certain instruments as debentures.

Rationalization of Penalties

  • One of the most applauded amendments made in the Amendment Act – the quantum of penalty will now be levied taking into consideration

  • the size of company

  • nature of business

  • injury to public interest

  • nature and gravity of default

  • repetition of default, etc

  • Two new sections with respect to factors for determining the level of punishment and for lesser penalties for one-person companies and small companies are inserted.

  • Penal provisions for small companies and one-person companies are reduced.

Easier Private Placement Process

  • The private placement process is simplified by doing away with separate offer letter details to be kept by company and reducing number of filings to registrar.

  • The company has been restricted from utilizing the money raised through private placement unless allotment has been made and return of allotment has been filed with the Registrar.

  • Change in definition of private placement is proposed to cover all securities offer and invitations other than rights. The Companies would be allowed to make offer of multiple security instruments simultaneously.

Loans to Directors

  • This was done to address the difficulties being faced in genuine transactions due to the complete embargo on providing loans to subsidiaries with common director.

  • The companies are permitted to give loans to entities in which directors are interested after passing special resolution and adhering to disclosure requirements. This would give big relief to the companies.

  • An exemption for granting loans and providing guarantees and security on behalf of wholly owned subsidiaries was inserted by way of the Meeting of Boards and its Powers, Rules in 2014. These rules, however, granted exemptions only for wholly owned subsidiaries”

  • The Amendment Act further bifurcates the regulatory framework into two categories:

  • contemplating certain transactions which are prohibited

  • consisting of transactions which may be permitted, subject to approval of the shareholders by way of a special resolution passed at a general meeting.

Disqualification for Independent Director Further Clarified

  • The amendment clarifies that this pecuniary relationship excludes the remuneration to such director or having transaction not exceeding 10 % of his total income or such amount as may be prescribed.

- Published/Last Modified on: March 13, 2018

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