Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Thursday, June 11, 2015

Relaxations by the Companies Amendment Act, 2015

For the ease of doing business in the country certain amendments have been made in Companies Act, 2013 and on May 26, 2015 The Companies Amendment Act, 2015 has come into force. Important amendments are as follows:-

No Requirement for minimum paid-up Capital
The requirement of having a minimum paid up capital for private companies Rs. 1 Lacs [Sec 2(68)] and public companies Rs.5 lacs [Sec 2(71)] is done away.

Fixation of Common Seal made optional
The requirement of fixation of the common seal of the company in each and every document posed operational difficulties for the company as the law lays down elaborate procedure for fixation of such common seal on documents.
Hence Section 9,12,22,46 and 223 amended and the fixation a common seal has been made optional. Now signature by its officers would suffice for legally binding the company.

Related party transaction
The requirement for getting RPTs approved by way of a special resolution is replaced with approval by ordinary resolutions only.
Further, for transactions between holding and wholly owned subsidiary companies, no general meeting approval is required by either of the companies. This is in line with the Listing Agreement.
This amendment seeks to empower the Audit Committee to grant omnibus approvals for related party transactions. However, the conditions for such omnibus approvals will come by way of the Rules.

Disclosure of Frauds reported by Auditors in the Board’s report
The insertion of new section 134(3)(ca) seeks to suggest that every immaterial fraud reported by the auditor shall find place in the Board's Report but there is no clarity on whether those frauds which have already been noted by the Board also need to be reported.

Restrictions on Bail
This amendment provides that bail restrictions will be applied for offences only relating to fraud under section 447.

Punishment for contravention of Section 73 or 76
Insertion of new section 76A seeks to suggest that if companies missed out the provision laid down in section 73 or 76
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
 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 the officer of the company who is in default is found guilty for contravention wilfully 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.

Dividend Related
This amendment to the Act is already appearing in Rule 5 of the Companies (Declaration and Payment of Dividend) Rules, 2014, which was amended w.e.f. 12th June, 2014.
The amendment is merely incorporating the provisions contained in the Rules, in the Act itself.
This amendment seeks to rectify the requirement of transferring equity shares for which unclaimed/unpaid dividend has been transferred to the IEPF even though subsequent dividend(s) has been paid or claimed during the period of 7 consecutive years.
Note that Section 124 is not yet enforced.

Loan to directors
Two more exemptions have been added in section 185 which are as follows:-
(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 utilised by the subsidiary company for its principal business activities.”

Establishment of special Courts
This is another important change that has been made. Now Special Courts would be empowered to try offences which are punishable with imprisonment of 2 years or more.

Strength of benches for hearing winding up cases
This amendment seeks to provide for winding up cases to be heard by 2-member Bench instead of a 3-member Bench for ease of doing business.

Public inspection of Board resolutions
Section 399 of the Act provides any person the right to electronically inspect any document filed or registered with the ROC by companies on payment of prescribed inspection fees.
This amendment prohibits such public inspection of Board resolutions filed by companies in Form MGT-14 with the ROC.
This amendment was actually not required if the lawmakers, at the first instance, removed the requirement of filing of Board resolutions with the form. Board resolutions are private internal company matters and public should not be given access to these documents. Instead of doing away with such a practice of uploading Board resolutions, the lawmakers are going ahead with amendment of the law itself.

Removal of Company's name from the Register of Companies
This amendment is in line with the omission of section 11.
Section 248(1): Where the Registrar has reasonable cause to believe that—
·         company has failed to commence its business within one year of its incorporation or;
·         a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455,
The Registrar shall send a notice to the company and all the directors of the company, of his intention to remove the name of the company from the register of companies and requesting them to send their representations along with copies of the relevant documents, if any, within a period of thirty days from the date of the notice. 
Contributed by Karishma Sharma

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