The Lok Sabha has passed the Companies (Amendment) Bill, 2017 (“Bill”) that seeks to make significant changes to the Companies Act, 2013 to remove complexities, improve ease of doing business, strengthen corporate governance standards and prescribes strict action against defaulting companies. The Bill now awaits the consent of Rajya Sabha.
The key amendments introduced by the Bill are as follows:
- Cap on layers of subsidiary companies, which was earlier proposed to be deleted, has been kept in-tact.
- Cap on investments through 2 layers of investment companies has been kept in-tact.
- Private placement process has been simplified, thereby enabling easy raising of funds by companies.
- Provisions prohibiting insider trading has been omitted from the Companies Act as such provisions should be applicable to listed companies only and such listed companies are already regulated by SEBI.
- Provisions prohibiting forward dealings in securities of a company by director or key managerial personnel has been deleted from the Companies Act.
- CSR provisions has been amended to a large extent to provide greater clarity.
- Disclosures in prospectus has been aligned with the regulations made by SEBI for simplicity.
- Eight year limit has been prescribed for reopening of past accounts.
- Unlisted companies can hold annual general meetings anywhere in India other than registered office as well, thereby reducing the compliance burden.
- Incorporation of companies has been made easier by allowing self-declaration instead of affidavits from subscriber to memorandum and first directors.
- Instead of share capital, voting power has been made as a deciding consideration for establishing associate and subsidiary companies.
- Test of materiality for pecuniary interest for independent directors has been prescribed.
- In this regard, please find attached the presentation wherein we have attempted to provide a clause-by-clause analysis of the Bill vis-à-vis the Companies Act, 2013.
Please note that the Bill is still awaiting the consent of the Rajya Sabha. Further, the readers are advised, for sake of more clarity, to refer to the relevant provisions of the Bill.