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The Companies (Amendment) Act, 2017: A Step Towards Ease Of Doing Business & Better Corporate Governance

Feb 23, 2018: This is an article by CS Yagya Dev Sharma. (yagyadevsharma11@gmail.com)

The Companies (Amendment) Bill, 2017 has been passed by Lok sabha on 27th July, 2017 and  by Rajya Sabha on 19th December, 2017 and got President’s assent on 3rd January, 2018, became Companies (Amendment) Act, 2017, seeking to strengthen corporate governance standards, initiate strict action against defaulting companies and help improve the ease of doing business in the country.


The major changes  include clarity on definitions for identifying associate companies, holding & subsidiary companies, related parties etc; aligning disclosure requirements in the prospectus with the regulations made by SEBI,  providing for maintenance of register of significant beneficial owners and filing of returns in this regard with the ROC, removal of requirement for annual ratification of auditor, rationalization of provisions related to loan to directors, omission of provisions relating to forward dealing and insider trading and doing away with the requirement of approval of the Central Government for managerial remuneration above prescribed limits, requiring attaching of financial statement of associate companies, stringent additional fees of Rs 100 per day in case of delay in filing of annual return and financial statement.

Since the Companies (Amendment) Act, 2017 is major development in field of Corporate Law, we can divide it into following for better understanding:

A. To make the Companies Act, 2013 more business friendly in line with Ease of Doing Business (Relaxations)

1. The time period for notice of situation of registered office or change thereof is increased from 15 days to 30 days. (Section 12).

2. Taken away requirement of Deposit Insurance. {Section 73 (2) (d)}

3. Books of accounts can be reopened up to a period eight financial years unless longer period for keeping books of accounts is directed. {Section 130 (3)}.

4. Web-address, if any, where annual return has been placed shall be part of Directors’ Report instead of Extract of Annual Return. {Section 134 (3) (a)}

5. The Central Government may prescribe format of Abridged Board’s Report for OPC and Small Company. {Section 134 (3A)}.

6. Tenure for threshold relating to CSR has been re-drafted by inserting “the immediately preceding financial year” instead of “any financial year”.

7. Where appointment of Independent Director is not required, the CSR Committee shall be constituted by two or more directors.

8. If copy of financial statements along with Auditors’ Report and other required documents sent less than 21 days before the meeting shall be deemed duly sent if agreed by not less than 95% majority. (Section 136)

9. Provision relating to ratification of Auditor in each AGM, has been omitted.

10. For the incorporation of the Company a declaration from each of subscribers shall given instead of affidavit.

11. Taken away the requirement relating to disclosure of indebtness into the Annual Return. 

12. The Central Government may prescribe format of Abridged Annual Return for OPC and Small Company. (Section 92).

13. Preparation of Extract of Annual Return is not required; the copy of annual return shall be placed on website of the Company. (Section 92).

14. The Annual General Meeting of an unlisted company can be held anywhere in India if consented by all members in writing or in electronic mode in advance. (Section 96)

15. The Extra – Ordinary General Meeting of an unlisted company can be held anywhere in India if consented by members in writing or in electronic mode. (Section 100)

16. Item may transact at a general meeting where the facility of electronic voting is provided, the item required to be passed by Postal Ballot. (Section 110) 

17. If a director is appointed as Independent Director or recommended by NRC Committee, deposit of Rupees One Lakh is not required. (Section 160) 

18. Provision relating to return of change in promoters and top ten shareholding (MGT-10) by listed Companies has been omitted. 

19. The provision relating to filing of a copy of special resolution in advance in respect of members approval for keeping register/returns at any other place in India then registered office with the ROC has been omitted. (section 94) 

20. If there is quorum through physical presence of directors, other directors may participate through video conferencing or other audio visual means on certain item which are restricted at Board meetings through video conferencing or other audio visual means. {Section 173 (2)}

21. The Companies are permitted to provide loan to other entities where the Director are interested after passing special resolution and required disclosures. (Section 185)

22. Approval of Central Government is not required for Managerial Remuneration.      (Section 197) 

23. Sweat Equity shares can be issued at any time, requirement relating to completion of one year after incorporation has been taken away.

24. The Central Government can provide any other number to be treated as DIN.

25. For reckoning the limit of directorships of twenty companies, the directorship in a dormant company shall not be included.

26. Filing of E-Form DIR-11 is made optional as for the words, "director shall also forward", the words "director may also forward" shall be substituted.

27. Provisions relating to Audit Committee and Nomination and Remuneration Committee shall not applicable to Debt listed private companies as for the words "every listed company", the words "every listed public company" shall be substituted. (Section 177 & 178)

28. Unregistered Companies having 2 or more members can be converted into the Company. (Section 366)

29. If a company defaulted in repayment of deposits or inters thereon, may accept deposits after a period of 5 years from the defaults made good.  

30. An employee authorised by Board can authenticate documents, proceedings, contracts of the Company. (Section 21)

31. The Maximum limits, which may be prescribed by Central Government, have been increased from five crores rupees and twenty crores rupees to ten crores rupees and one hundred crores rupees respectively. {Section 2 (85)}

32. A company may, at any time, make more than on issue of securities under section 42 with some conditions. 

33. A company may issue shares at discount to its creditors when debt is converted into shares. (Section 53) 

34. A notice in relation to right issue may be dispatched by courier and any other mode having proof of delivery in addition method specified earlier. {Section 62 (2)}

35. Time limit for intimation of Charge Satisfaction has been increase from 30 days to 300 days and Company as well as Charge Holder may intimate the same.

36. Members may vote on resolution required under section 188 if in Company 90 % or more members, in number are relatives of promoters or are related parties. 

37. The provision related to “Interested Director” has been omitted.

38. Any officer one level below directors can be designated as KMP by the Board.       {Section 2 (51)}

39. The penalty for contravention of Section 42, may extend to amount raised by the Company or two crore rupees, whichever is lower, previously the penalty may extend to higher of amount involved or two crores rupees. {Section 42 (10)}

40. The punishment for contravention of Section 73 or Section 76 shall twice the amount of deposit accepted by the Company or one crore rupees, whichever is lower, previously it was one crore rupees. (Section 76 A)

41. Offences punishable with fine only and offences punishable with fine or imprisonment be compounded, earlier offences punishable with fine only be compounded. 


B. To make the Companies Act, 2013 more stringent in line with better Corporate Governance.

1. Private placement offer and application shall not carry any right of renunciation.  {Section 42 (3)}

2. Return of allotment under Private Placement shall be filed within 15 days from the date of allotment. {Section 42 (8)}

3. A company shall not utilise monies raised through private placement unless allotment is made and the return of allotment is filed with the Registrar. {Section 42 (4)}

4. New Section 3A inserted having provisions similar to earlier Companies Act, 1956 that if the member shall be severally liable for whole debts of the company contracted during that   time, and may be severally sued, if at any time the number of members of Company is reduced below the minimum prescribed and the company carries on business for a period of more than 6 months with the reduced no. of members. (section 26)

5. The definition of Subsidiary Company has been altered by inserting “total voting power” in place of “total share capital”. {Section 2 (85)}

6. Reservation of name in case of new Company shall be for 20 days and in case of existing company 60 days from the approval of name. {Section 4 (5)}

7. The Company shall also attach along with its financial statement, a separate statement containing the salient features of the Financial statements of its subsidiary(ies) and associate company.

8. A director shall be resident if stayed in India for 182 days during the financial year, and it shall apply to newly incorporate proportionately. (Section 149)

9. Casual vacancy may be filed by the Board, which shall be subsequently approved by members in the immediate next general meeting.

10. Where a director incur any of disqualification under 164 (2)  due to default of filing of financial statement or annual return or repayment of deposit or pay interest or other mentioned in section, than he shall be vacate office of the director in all the companies other than the company which is in default. (Section 167)

11. The company  shall deposit on or before 30th April each  year, such sum which shall not be less than  20% of the amount of its deposits maturing during  the following financial year and kept in a separate  bank account ‘deposit repayment reserve  account’. {Section 73 (2) (c)}

12. Section 403 has been amended, additional fees for fling shall not be less than one hundred rupees per day and different amount may be prescribed, if default on two or more occasions the additional fee shall not be less than two hundred rupees per day. This section shall applicable for filing under Section 92 and 137 i.e. annual return and financial statements, the additional fee for other filing is to be prescribed.

13. Every Company to maintain a register of the interest declared by significant beneficial owner and changes therein and file a return with ROC. (Section 90)

14. The Chief Executive Officer of the Company, if any, shall sign the financial statements for submission to auditors even he is not a director.

C. To make the Companies Act, 2013 more aligned with Accounting Standard, the SEBI Act, 1992 and the regulations made thereunder, the RBI Act, 1934 and the regulations made thereunder

1. The instruments referred to in Chapter – III – D of the RBI Act, 1934 and such other instrument prescribed by CG in consultation with RBI, issued by a company, shall not be treated as debenture. {Section 2 (30) }

2. The debit or credit balance of Profit & Loss account shall be considered in calculation of Net Worth. {Section 2 (57) }

3. The provisions relating to Forward Dealing and Insider Trading have been deleted. (Section 194 & 195)

4. The provisions relating to Prospectus are aligned with the SEBI Act, 1992 and regulation made thereunder.

5. The definition of Turnover has been altered by inserting “gross amount of revenue recognised in Profit & Loss Account”. {Section 2 (91) }

Amendments which have been notified so far:- 
Indian Companies (Amendment) Act 2017

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