10 Key Takeaways From Companies Amendment Bill 2016
Companies Amendment Bill, 2016 (the bill) was introduced in Lok Sabha on 16th March, 2016. Most of the amendments proposed in bill are broadly aimed at addressing difficulties in implementation of provisions of Companies Act, 2013. Key amendments proposed in the bill are as follows: Appointment of auditors: It has been proposed to do away with the requirements of annual ratification by members with respect to appointment of auditors. Further, under the exisitng provisions, the auditor who has resigned from the company needs to file Form No. ADT-3 with the company and ROC. His failure to do so may attract maximum penalty of Rs 5 lakhs. Now it has been proposed to reduce such penalty to Rs 50,000. However, such penalty should not exceed the remuneration of auditor. Prohibition on loan or guarantee: Bill seeks to limit the prohibition on loans, advances, etc., to any person in which any of the director is interested in. It has been proposed to allow companies to give loan’s or guarantee’s or provide security to any person in whom any of the director is interested in subject to passing of special resolution by the company and utilisation of loans by the borrower for its principal business activities. Restrictions on layers of investment companies: Under the existing provisions a company shall make investment through not more than two layers of investment companies. The Bill proposes to delete the restrictions on layers of investments. Managerial remuneration: It has been proposed to do away with requirement of obtaining special resolution and approval of Central Govt. for payment of managerial remuneration in excess of prescribed limits of Schedule V. However, for making such payments prior approval of bank or public financial institution or non-convertible debenture holder or secured creditor is also required before taking approval from shareholders. DIN: It has been proposed to recognise any other identification number, as may be prescribed, in place of DIN. Repayment of deposit: Under the exising provisions, pubic deposits shall be repaid within one year from commencement of the Companies Act, 2013 or from due date of payment, whichever is earlier. Now the bill proposes to provide that such public deposits shall be repaid within 3 years from the enforcement of Section 74 (Repayment of deposit etc., accepted before commencement of the Act) of the Companies Act, 2013 or before expiry of the period for which deposits were accepted, whichever is earlier. Simplification of private placement: Bill proposes to simplify the requirements with reference to private placements, such as doing away with separate offer letter, reducing number of filings with registrar. Liberty on public issue: Bill proposes to remove the restriction which requires company to make issue only after one year has elapsed from the date of commencement of its business. Annual Return: Bill proposes to remove the extract of annual return forming part of Board’s report and provide disclosure of web address/web-link of the annual return in Board’s report. It also proposes to omit requirement regarding disclosure of indebtedness, and modify requirement of disclosure of names, addresses, countries of incorporation, registration and percentage of shareholding of Foreign Institutional Investors. Maintenance of registered office: Under the existing provisions, the company has to maintain its registered office within 15 days of its incorporation. The bill proposed to provide that a company to has to maintain its registered office within 30 days of incorporation.