ABSOLUTE
COMPARATIVE ANAYLYSIS OF NOTIFIED SECTIONS OF COMPANIES (AMENDMENT) ACT, 2017
The Companies (Amendment) Bill,
2017, introduced in Lok Sabha on 16 March, 2016 as The Companies (Amendment)
Bill, 2016 was referred to the Standing Committee on Finance on 12 April, 2016.
The Standing Committee on Finance examined the Bill and submitted its report on
December 7, 2016. 2 In April 2017, the government circulated certain amendments
to the Bill. The Government after considering the suggestions of the Committee
and also the experience gained by it, gave notice of amendments as approved by
the Cabinet to the Lok Sabha. The Lok Sabha has passed the Companies
(Amendment) Bill, 2017 on July 27, 2017. Finally President assent has received
for the Companies Amendment Bill, 2017 on Jan 03, 2018.
In
exercise of the powers conferred by sub-section (2) of section 1 of the
Companies (Amendment) Act, 2017 (1 of 2018), the Central Government hereby
appoints the 9th February, 2018 as the date on which the following provisions
of the said Act shall come into force, namely :-
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SECTIONS
(CA- 2013)
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COMPANIES
ACT 2013
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COMPANIES
AMNDMENT ACT 2017
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ANAYLYSIS
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Section 2(28)- Definition
of ‘cost accountant’
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“cost accountant” means a cost accountant as defined in clause (b)
of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959
(23 of 1959)
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"Cost Accountant" means a cost accountant as defined
in clause (b) of sub- section (1) of section 2 of the Cost and Works
Accountants Act, 1959 and who holds a valid certificate of practice under
sub-section (1) of section 6 of that Act;
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Amendment
via insertion carried in section 2(28):
More Clarity provided.
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Section 2(30)- Definition
of ‘Debenture’
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“debenture” includes debenture stock, bonds or any other
instrument of a company evidencing a debt, whether constituting a charge on
the assets of the company or not
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debenture” includes debenture stock, bonds or any other
instrument of a company evidencing a debt, whether constituting a charge on
the assets of the company or not
following proviso shall be inserted, namely:—
"Provided that –
(a) the instruments
referred to in Chapter III-D of the Reserve Bank of India Act, 1934; and
(b) such other instrument,
as may be prescribed by the Central Government in consultation with Reserve
Bank of India, issued by a company.
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Amendment
via insertion carried in section 2(30);
Exclusion of instruments referred to in Chapter III-D of the
Reserve Bank of India Act, 1934; i.e comprises of derivatives and money
market instruments. Therefore, such instruments shall not be covered under
definition of debenture
Further other instruments prescribed by the Central Government
in consultation with the RBI to be excluded
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Section 2(41)- Definition
of ‘Financial year’
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“financial year”, in relation to any company or body corporate,
means the period ending on the 31st day of March every year, and where it has
been incorporated on or after the 1st day of January of a year, the period
ending on the 31st day of March of the following year, in respect whereof
financial statement of the company or body corporate is made up:
Provided that on an application made by a company or body
corporate, which is a holding company or a subsidiary of a company
incorporated outside India and is required to follow a different financial
year for consolidation of its accounts outside India, the [Tribunal] may, if
it is satisfied, allow any period as its financial year, whether or not that
period is a year:
Provided further that a
company or body corporate, existing on the commencement of this Act, shall,
within a period of two years from such commencement
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“financial year”, in relation to any company or body corporate,
means the period ending on the 31st day of March every year, and where it has
been incorporated on or after the 1st day of January of a year, the period
ending on the 31st day of March of the following year, in respect whereof
financial statement of the company or body corporate is made up:
Provided that on an application made by a company or body
corporate, which is a holding company or a subsidiary or associate company of
a company incorporated outside India and is required to follow a different
financial year for consolidation of its accounts outside India, the
[Tribunal] may, if it is satisfied, allow any period as its financial year,
whether or not that period is a year:
Provided further that a
company or body corporate, existing on the commencement of this Act, shall,
within a period of two years from such commencement
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Amendment
via insertion carried in section 2(41);
Along with holding company or subsidiary company now associate
company of a company incorporated
outside India is allowed to make application to the Tribunal, for allowing a
different period as a financial year
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Section 2(46)- Definition
of ‘Holding Company’
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“holding company”, in relation to one or more other companies,
means a company of which such companies are subsidiary companies
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“holding company”, in relation to one or more other companies,
means a company of which such companies are subsidiary companies:
Explanation shall be
inserted, namely:— 'Explanation.—For the purposes of this clause, the
expression "company" includes any body corporate;'
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Amendment
via insertion carried in section 2(46);
It included body corporates so that a company incorporated
outside India, could also be considered to be the holding company for the
purpose of the Act, 2013.
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Section 2(49)- Definition
of ‘Interested director’
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“interested director” means a director who is in any way,
whether by himself or through any of his relatives or firm, body corporate or
other association of individuals in which he or any of his relatives is a
partner, director or a member, interested in a contract or arrangement, or
proposed contract or arrangement, entered into or to be entered into by or on
behalf of a company;
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Omitted
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Omitted
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Section 2(51)- Definition
of ‘Key Managerial Personnel’
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―key managerial personnel”, in relation to a company, means—
(i) the Chief Executive Officer or the managing director or the
manager;
(ii) the company secretary;
(iii) the whole-time director;
(iv) the Chief Financial Officer; and
(v) such other officer as may be prescribed;
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“Key managerial personnel" in relation to a company, means—
(i) the Chief Executive Officer or the managing director or the
manager;
(ii) the company secretary;
(iii) the whole-time director;
(iv) the Chief Financial Officer;
(v) such other officer, not
more than one level below the directors who is in whole-time employment,
designated as key managerial personnel by the Board; and
(vi) such other officer as
may be prescribed;”
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Amendment
via insertion:
Self explanatory
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Section 2(57)- Definition
of ‘net worth’
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“net worth” means the aggregate value of the paid-up share
capital and all reserves created out of the profits and securities premium account,
after deducting the aggregate value of the accumulated losses, deferred expenditure
and miscellaneous expenditure not written off, as per the audited balance
sheet, but does not include reserves created out of revaluation of assets,
write-back of depreciation and amalgamation
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“Net worth” means the aggregate value of the paid-up share
capital and all reserves created out of the profits, securities premium account and debit or credit balance of profit and
loss account, after
deducting the aggregate value of the accumulated losses, deferred expenditure
and miscellaneous expenditure not written off, as per the audited balance
sheet, but does not include reserves created out of revaluation of assets,
write-back of depreciation and amalgamation.
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Amendment
via insertion:
It include the debit or credit balance of profit and loss account
in the calculation of net worth.
Net worth will be referred for:
identifying
eligibility of co for accepting public deposit,
CSR
applicability,
Cost
audit applicability,
restrictions
on board power (180). |
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Section 2(71)- Definition
of ‘public company’
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“public company” means a company which—
(a) is not a private company;
(b) has a minimum paid-up share capital ,
as may be prescribed:
Provided that a company which is a subsidiary of a company, not being a
private company, shall be deemed to be public company for the purposes of
this Act even where such subsidiary company continues to be a private company
in its articles
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“public company” means a company which—
(a) is not a private company;and
(b) has a minimum paid-up share capital ,
as may be prescribed:
Provided that a company which is a subsidiary of a company, not being a
private company, shall be deemed to be public company for the purposes of
this Act even where such subsidiary company continues to be a private company
in its articles
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Amendment
via insertion:
It provides that now both conditions to be satisfied now.
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Section 2(72)- Definition
of ‘public financial institution’
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“public financial institution” means—
(i) the Life Insurance Corporation of India, established under
section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956);
(ii) the Infrastructure Development Finance Company Limited,
referred to in clause (vi) of sub-section (1) of section 4A of the Companies
Act, 1956 (1 of 1956) so repealed under section 465 of this Act;
(iii) specified company referred to in the Unit Trust of India
(Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);
(iv) institutions notified by the Central Government under
sub-section (2) of section 4A of the Companies Act, 1956 (1 of 1956) so
repealed under section 465 of this Act;
(v) such other institution as may be notified by the Central
Government in consultation with the Reserve Bank of India:
Provided that no institution shall be so notified unless—
(A) it has been established or constituted by or under any
Central or State Act; or
(B) not less than fifty-one per cent of the paid-up share
capital is held or controlled by the Central Government or by any State
Government or Governments or partly by the Central Government and partly by
one or more State Governments
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“public financial institution” means—
(i) the Life Insurance Corporation of India, established under
section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956);
(ii) the Infrastructure Development Finance Company Limited,
referred to in clause (vi) of sub-section (1) of section 4A of the Companies
Act, 1956 (1 of 1956) so repealed under section 465 of this Act;
(iii) specified company referred to in the Unit Trust of India
(Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);
(iv) institutions notified by the Central Government under
sub-section (2) of section 4A of the Companies Act, 1956 (1 of 1956) so
repealed under section 465 of this Act;
(v) such other institution as may be notified by the Central
Government in consultation with the Reserve Bank of India:
Provided that no institution shall be so notified unless—
(A) it has been established or constituted by or under any
Central or other than
this Act or the previous company law; or
(B) not less than fifty-one per cent of the paid-up share
capital is held or controlled by the Central Government or by any State
Government or Governments or partly by the Central Government and partly by
one or more State Governments
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Amendment
via substitution:
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Section 2(76)- Definition
of ‘Related Party’
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“related party”, with reference to a company, means—
(i) a director or his relative;
(ii) a key managerial personnel or his relative;
(iii) a firm, in which a director, manager or his relative is a
partner;
(iv) a private company in which a director or manager or his
relative is a member or director;
(v) a public company in which a director or manager is a
director or and holds along with his relatives, more than two per cent of its
paid-up share capital;
(vi) any body corporate whose Board of Directors, managing
director or manager is accustomed to act in accordance with the advice,
directions or instructions of a director or manager;
(vii) any person on whose advice, directions or instructions a
director or manager is accustomed to act:
Provided that nothing in sub-clauses (vi) and (vii) shall apply
to the advice, directions or instructions given in a professional capacity;
(viii) any company which is—
(A) a holding, subsidiary or an associate company of such
company; or
(B) a subsidiary of a holding company to which it is also a
subsidiary;
(ix) such other person as may be prescribed
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“related party”, with reference to a company, means—
(i) a director or his relative;
(ii) a key managerial personnel or his relative;
(iii) a firm, in which a director, manager or his relative is a
partner;
(iv) a private company in which a director or manager or his
relative is a member or director;
(v) a public company in which a director or manager is a
director or and holds along with his relatives, more than two per cent of its
paid-up share capital;
(vi) any body corporate whose Board of Directors, managing
director or manager is accustomed to act in accordance with the advice,
directions or instructions of a director or manager;
(vii) any person on whose advice, directions or instructions a
director or manager is accustomed to act:
Provided that nothing in sub-clauses (vi) and (vii) shall apply
to the advice, directions or instructions given in a professional capacity;
(viii) any body corporate
which is—
A. a holding, subsidiary or
an associate company of such company;
B. a subsidiary of a
holding company to which it is also a subsidiary; or
C. an investing company or
the venturer of the company;
Explanation.— For the
purpose of this clause, “the investing company or the venturer of a company”
means a body corporate whose investment in the company would result in the
company becoming an associate company of the body corporate
(ix) such other person as may be prescribed
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Amendment via substitution:
It provides for broader concept now:
‘Company‘ is replaced with body corporate‘
Earlier only Company / entity incorporated in India was included
After amendment Company/ Entity incorporated outside India are
included.
That means on enactment of Amendment act, body corporate that is
holding/ subsidiary/associate/fellow subsidiary of Indian Company should be
treated as Related Party
Further now, associate company and investor will be treated as
related party f each other |
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Section 2(85)- Definition
of ‘small company’
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“Small company” means a company, other than a public company,—
(i) paid-up share capital of which does not exceed fifty lakh
rupees or such higher amount as may be prescribed which shall not be more
than five crore rupees; and
(ii) turnover of which as per its last profit and loss account
does not exceed two crore rupees or such higher amount as may be prescribed
which shall not be more than twenty crore rupees
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Small Company means a company, other than a public company,—
(i) paid-up share capital of which does not exceed fifty lakh
rupees or such higher amount as may be prescribed which shall not be more
than ten crore rupees; and
(ii) turnover of which as per profit and loss
account for the immediately preceding financial year does not exceed two crore
rupees or such higher amount as may be prescribed which shall not be more
than one hundred crore rupees
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Amendment
via substitution:
Substitution is self explanatory;
turnover
should be as per profit and loss account for the immediately preceding
financial year and not as per its last financial year.
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Section 2(91)- Definition
of ‘Turnover’
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“turnover”means the aggregate value of the realisation of amount
made from the sale, supply or distribution of goods or on account of services
rendered, or both, by the company during a financial year;
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"turnover" means the gross amount of revenue
recognised in the profit and loss account from the sale, supply, or
distribution of goods or on account of services rendered, or both, by a
company during a financial year;
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Amendment
via substitution:
Bought in line with as per Indinan Accounting Standard (that revenue
recognition concept).
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Section 3A- Members
severally liable certain cases
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"3A.If at any time the number of members of a company is
reduced, in the case of a public company, below seven, in the case of a
private company, below two, and the company carries on business for more than
six months while the number of members is so reduced, every person who is a
member of the company during the time that it so carries on business after
those six months and is cognisant of the fact that it is carrying on business
with less than seven members or two members, as the case may be, shall be
severally liable for the payment of the whole debts of the company contracted
during that time, and may be severally sued therefor.
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Amendment
via insertion of new section to principal section 3A:
Please note: Section 3(1) of the Act provides for the minimum
number of persons required for formation of a company.
Further this section provides that, if number of members falls
below prescribed limit, and business is carried for more than 6 months then
those members who are serving will be held personally liable for the payment
of the whole debts of the company contracted during that time.
Bought in line with Companies Act 1956.
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Section 4- Memorandum
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(5)(i) Upon receipt of an application under sub-section (4), the
Registrar may, on the basis of information and documents furnished along with the application,
reserve the name for a period of sixty day from the date of the application.
(ii) Where after reservation of name under clause (i), it is
found that name was applied by furnishing wrong or incorrect information,
then,—
(a) if the company has not been incorporated, the reserved name
shall be cancelled and the person making application under sub-section (4)
shall be liable to a penalty which may extend to one lakh rupees;
(b) if the company has been incorporated, the Registrar may,
after giving the company an opportunity of being heard—
(i) either direct the company to change its name within a period
of three months, after passing an ordinary resolution;
(ii) take action for striking off the name of the company from
the register of companies ; or
(iii) make a petition for winding up of the company.
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(5)(i)Upon
recepit of an application under sub-section (4), the Registrar may, on the
basis of information and documents furnished along with the application,
reserve the name for a period of twenty days from the date of approval or
such other period as may be presecribed:
Provided that in case of an
application for reservation of name or for change of its name by an existing
company, the Registrar may reserve the name for a period of sixty days from
the date of approval.
(ii) Where after reservation of name under clause (i), it is found
that name was applied by furnishing wrong or incorrect information, then,—
(a) if the company has not been incorporated, the reserved name
shall be cancelled and the person making application under sub-section (4)
shall be liable to a penalty which may extend to one lakh rupees;
(b) if the company has been incorporated, the Registrar may,
after giving the company an opportunity of being heard—
(i) either direct the company to change its name within a period
of three months, after passing an ordinary resolution;
(ii) take action for striking off the name of the company from
the register of companies ; or
(iii) make a petition for winding up of the company.
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Amendment
via substitution carried in sub section (5) of section 4:
Now after name approval, name will be reserved only for twenty
days instead of sixty days, for fresh incorporation.
However for existing company name will be reserved for sixty
days, after name approval.
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Section 21- Authentication
of documents, proceedings and contracts
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Save as otherwise provided in this Act,—
(a) a document or
proceeding requiring authentication by a company; or
(b) contracts made by or on behalf of a company,
may be signed by any key
managerial personnel or an officer of the company duly authorised by the Board in this behalf.
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Save as otherwise provided in this Act,—
(a) a document or
proceeding requiring authentication by a company; or
(b) contracts made by or on behalf of a company,
may be signed by any key
managerial personnel or "an officer or employee of the company duly
authorised by the Board in this behalf.
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Amendment
via substitution carried in of section 21:
Apart from KMPs and officers of the Company duly authorised by
board now, even employee of the
company can be authorised by Board to authenticate the documents on the
behalf of company.
Authentication
is something more than attestation.
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Section 35- Civil liability
for Mis-statements in prospectus
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(2) No person shall be liable under sub-section (1), if he
proves—
(a) that, having consented to become a director of the company,
he withdrew his consent before the issue of the prospectus, and that it was
issued without his authority or consent; or
(b) that the prospectus was issued without his knowledge or
consent, and that on becoming aware of its issue, he forthwith gave a
reasonable public notice that it was issued without his knowledge or consent.
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(2) No person shall be liable under sub-section (1), if he
proves—
(a) that, having consented to become a director of the company,
he withdrew his consent before the issue of the prospectus, and that it was
issued without his authority or consent; or
(b) that the prospectus was issued without his knowledge or
consent, and that on becoming aware of its issue, he forthwith gave a
reasonable public notice that it was issued without his knowledge or consent.
"(c) that, as regards
every misleading statement purported to be made by an expert or contained in
what purports to be a copy of or an extract from a report or valuation of an
expert, it was a correct and fair representation of the statement, or a
correct copy of, or a correct and fair extract from, the report or valuation
; and he had reasonable ground to believe and did up to the time of the issue
of the prospectus believe, that the person making the statement was competent
to make it and that the said person had given the consent required by
sub-section (5) of section 26 to the issue of the prospectus and had not
withdrawn that consent before delivery of a copy of the prospectus for registration
or, to the defendant's knowledge, before allotment thereunder."
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Amendment
via insertion of new caluse in sub section (2) in section 35:
The person who has been authorised or a director, promoter,
expert, for issue of prospectus, then such person sall not be held liable for
any civil actions, if such person relies on a misleading statement made by an
expert and he had reasonable ground to believe and such person has given
consent under sub section 26(5) of the Act and had not withdrawn that consent
before delivery of a copy of the prospectus for registration or, to the
defendant's knowledge, before allotment
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Section 47- Voting rights
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(1) Subject to the provisions of section 43 and
sub-section (2) of section 50,—
(a) *******
(b) ******.
(2) Every member of a company limited by
shares and holding any preference share capital therein shall, in respect of
such capital, have a right to vote only on resolutions placed before the
company which directly affect the rights attached to his preference shares and,
any resolution for the winding up of the company or for the repayment or
reduction of its equity or preference share capital and his voting right on a
poll shall be in proportion to his share in the paid-up preference share
capital of the company:
Provided that *******
Provided
further that *******
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(1) Subject to the provisions of section 43, sub-section (2) of section 50 and
sub-section (1) of section 188,—
(a) *******
(b) ******.
(2) Every member of a company limited by
shares and holding any preference share capital therein shall, in respect of
such capital, have a right to vote only on resolutions placed before the
company which directly affect the rights attached to his preference shares
and, any resolution for the winding up of the company or for the repayment or
reduction of its equity or preference share capital and his voting right on a
poll shall be in proportion to his share in the paid-up preference share
capital of the company:
Provided that *******
Provided
further that *******
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Amendment
via Substitution:
Section 47 dealing with member’s right to vote has been bought
in line with section 188, which restricts related parties right to vote on
ordinary/ special resolution to approve RPTs
It implies that right of every member holding equity shares to
vote on resolution plaavce in general meetings will not be available if such member is are related parties and
prohibited from voting under section 188.
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Section 53- Prohibition on
issue of shares at discount
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(2) Any share issued by a company at a discounted price shall be
void
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(2)Any share issued by a company
"(2A) Notwithstanding anything contained in sub-sections
(1) and (2), a company may issue shares at a discount to its creditors when
its debt is converted into shares in pursuance of any statutory resolution
plan or debt restructuring scheme in accordance with any guidelines or
directions or regulations specified by the Reserve Bank of India under the
Reserve Bank of India Act, 1934 or the Banking (Regulation) Act, 1949
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It provides that company may issue shares at discount to its
creditors when its debt converted into share in pursuance of any statutory
resolution plan or debt restructuring scheme.
The
amenement will provide flexibility to creditors to convert their debt into
shares issued at a discount which was earlier prohibited. It seeks to address the concern that when a company
goes into insolvency its equity value is eroded and its not a viable
proposition to convert loan shares at face value.
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Section 62- Further issue
of share capital
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1) Where at any time,
a company having a share capital
proposes to increase its subscribed capital by the
issue of further shares, such shares shall be offered—
(c) to any persons, if it is authorised by a special
resolution, whether or not those persons include the persons referred to in
clause (a) or clause (b), either for cash or for a
consideration other than cash, if the price of such shares is determined by
the valuation report of a registered valuer subject to such conditions as may be
prescribed
(ii) for
sub-section (2), the following sub-section shall be substituted, namely:—
The notice referred to in
sub-clause (i) of clause (a) of sub-section (1) shall be
despatched through registered post or speed post or through electronic mode
to all the existing shareholders at least three days before the opening of
the issue.
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1) Where at any time,
a company having a share capital
proposes to increase its subscribed capital by the
issue of further shares, such shares shall be offered—
(c) to any persons, if it is authorised by a special
resolution, whether or not those persons include the persons referred to in
clause (a) or clause (b), either for cash or for a
consideration other than cash, if the price of such shares is determined by
the valuation report of a registered valuer, subject to the compliance with the applicable
provisions of Chapter III and any other conditions as may be prescribed.
"(2) The notice
referred to in sub-clause (i) of clause (a) of sub-section (1) shall be
dispatched through registered post or speed post or through electronic mode
or courier or any other mode having proof of delivery to all the existing
shareholders at least three days before the opening of the issue."
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Amendment
via substitution, insertion in sub section (1), and (2)
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Section 76A- Punishment for
Contravention of Section 73 or Section 76
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Where a company accepts or invites or allows or causes any other
person to accept or invite on its behalf any deposit in contravention of
the manner or the conditions prescribed under section 73 or section 76
or rules made thereunder or if a company fails to repay the deposit or
part thereof or any interest due thereon within the time specified under
section 73 or section 76 or rules made thereunder or such further
time as may be allowed by the Tribunal under section 73,—
(a) 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
(b) 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 if it is proved that the officer of the company who
is in default, has contravened such provisions knowingly or 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.
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Where a company accepts or invites or allows or causes any other
person to accept or invite on its behalf any deposit in contravention of
the manner or the conditions prescribed under section 73 or section 76
or rules made thereunder or if a company fails to repay the deposit or
part thereof or any interest due thereon within the time specified under
section 73 or section 76 or rules made thereunder or such further
time as may be allowed by the Tribunal under section 73,—
(a) 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 or twice the amount of deposit accepted by the
company, whichever is lower but which may extend to ten crore rupees; and
(b) every officer of the company who is in default shall be punishable with imprisonment which may extend to "seven years and with fine 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 if it is proved that the officer of the company who
is in default, has contravened such provisions knowingly or 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.
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Amendment
via substitution:
Change in amount of penalty
Every officer in default will be charged with imprisonment and
fine both, earlier Earlier it was imprisonment or fine, now it is non
compoundable.
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Section 110- Postal Ballot
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(1) Notwithstanding anything contained in this Act, a company—
(a) shall, in respect of such items of business as the
Central Government may, by notification, declare to be transacted only by
means of postal ballot; and
(b) may, in respect of any item of business, other than
ordinary business and any business in respect of which directors or auditors
have a right to be heard at any meeting, transact by means of postal ballot,
in such manner as may be prescribed, instead of transacting
such business at a general meeting.
(2) If a resolution is assented to by the requisite majority of
the shareholders by means of postal ballot, it shall be deemed to have been
duly passed at a general meeting convened in that behalf.
|
(1) Notwithstanding anything contained in this Act, a company—
(a) shall, in respect of such items of business as the
Central Government may, by notification, declare to be transacted only by
means of postal ballot; and
(b) may, in respect of any item of business, other than
ordinary business and any business in respect of which directors or auditors
have a right to be heard at any meeting, transact by means of postal ballot,
in such manner as may be prescribed, instead of transacting
such business at a general meeting.
[Provided that any item of
business required to be transacted by means of postal ballot under clause (a),
may be transacted at a general meeting by a company which is required to
provide the facility to members to vote by electronic means under section
108, in the manner provided in that section.]
(2) If a resolution is assented to by the requisite majority of
the shareholders by means of postal ballot, it shall be deemed to have been
duly passed at a general meeting convened in that behalf.
|
Amendment
via and insertion
E voting facility will be be provided for matters listed under
clause (a) if they transacted by means of postal ballot inviting participants
by maximum shareholders.
|
|
Section 123- Declaration of
dividend
|
1) No dividend shall be declared or paid by a company for any
financial year except—
(a) out of the profits of the company for that year
arrived at after providing for depreciation in accordance with the provisions
of sub-section (2), or out of the profits of the company for any previous
financial year or years arrived at after providing for depreciation in
accordance with the provisions of that sub-section and remaining
undistributed, or out of
(b) out of money provided by the Central Government or a
State Government for the payment of dividend by the company in pursuance of a
guarantee given by that Government:
Provided that a company may, before the declaration of any dividend
in any financial year, transfer such percentage of its profits for that
financial year as it may consider appropriate to the reserves of the company:
[Provided further that where, owing to inadequacy or
absence of profits in any financial year, any company proposes to declare
dividend out of the accumulated profits earned by it in previous years
and "transferred
by the company to the reserves such declaration of dividend shall not
be made except in accordance with such rules as may be
prescribed in this behalf:]
Provided also that no dividend shall be declared or paid
by a company from its reserves other than free reserves.
[Provided also that no company shall declare dividend
unless carried over previous losses and depreciation not provided in previous
year or years are set off against profit of the company for the current
year.]
(2) For the purposes of clause (a) of sub-section (1),
depreciation shall be provided in accordance with the provisions of Schedule
II.
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1) No dividend shall be declared or paid by a company for any
financial year except—
(a) out of the profits of the company for that year
arrived at after providing for depreciation in accordance with the provisions
of sub-section (2), or out of the profits of the company for any previous financial
year or years arrived at after providing for depreciation in accordance with
the provisions of that sub-section and remaining undistributed, or out
of both
Provided that in computing profits any amount representing unrealised
gains, notional gains or revaluation of assets and any change in carrying
amount of an asset or of a liability on measurement of the asset or the
liability at fair value shall be excluded; or
(b) out of money provided by the Central Government or a
State Government for the payment of dividend by the company in pursuance of a
guarantee given by that Government:
Provided that a company may, before the declaration of any dividend
in any financial year, transfer such percentage of its profits for that
financial year as it may consider appropriate to the reserves of the company:
[Provided further that where, owing to inadequacy or
absence of profits in any financial year, any company proposes to declare
dividend out of the accumulated profits earned by it in previous years
and [transferred
by the company to the free reserves], such declaration of dividend
shall not be made except in accordance with such rules as may be
prescribed in this behalf:]
Provided also that no dividend shall be declared or paid
by a company from its reserves other than free reserves.
[Provided also that no company shall declare dividend
unless carried over previous losses and depreciation not provided in previous
year or years are set off against profit of the company for the current
year.]
(2) For the purposes of clause (a) of sub-section (1),
depreciation shall be provided in accordance with the provisions of Schedule
II.
"(3) The Board of
Directors of a company may declare interim dividend during any financial year
or at any time during the period from closure of financial year till holding
of the annual general meeting out of the surplus in the profit and loss
account or out of profits of the financial year for which such interim
dividend is sought to be declared or out of profits generated in the financial
year till the quarter preceding the date of declaration of the interim
dividend:
Provided that in case the
company has incurred loss during the current financial year up to the end of
the quarter immediately preceding the date of declaration of interim
dividend, such interim dividend shall not be declared at a rate higher than
the average dividends declared by the company during immediately preceding
three financial years."
|
Amendment
via substitution, omission and insertion.
Items to be excluded from calculation of profits has been
specified.
The Company will have freedom to utilise balance in P&L not transferred
to reserves for dividend.
Ambiguity has been removed by replacing word “reserves” with
free reserves”
Provision for declaration of interim dividend are more specific.
It clears that Company can declare interim dividend
during any financial year or
any time during the period from closure of financial year till
holding of the AGM
Out of:
Surplus in P&L
Profits of FY for which interim dividend is declared
Profits earned generated till the preceding quarter the date of
declaration
if company incurs quarterly loss before declaration of interim
dividend.
Rate will not be higher than the average dividends declared by
the company during immediately preceding three financial years."
|
|
Section 130- Re-opening of
accounts on court’s or tribunal’s orders
|
(1) A company shall not re-open
its books of account and not recast its financial
statement , unless an application in this regard is made by the Central
Government, the Income-tax authorities, the Securities and Exchange
Board , any other statutory regulatory body or authority or any person
concerned and an order is made by a court of competent jurisdiction or
the Tribunal to the effect that—
(i) the relevant earlier accounts were prepared in a
fraudulent manner; or
(ii) the affairs of the company were mismanaged during
the relevant period, casting a doubt on the reliability of financial
statements:
Provided that the court or the Tribunal, as the case may be, shall
give notice to the Central Government, the Income-tax authorities, the
Securities and Exchange Board or any other statutory regulatory body or
authority and shall take into consideration the representations, if
any, made by that Government or the authorities, Securities and Exchange
Board or the body or authority concerned or before passing
any order under this section.
(2) Without prejudice to the provisions contained in this
Act the accounts so revised or re-cast under sub-section (1)
shall be final.
|
(1) A company shall not re-open
its books of account and not recast its financial
statement , unless an application in this regard is made by the Central
Government, the Income-tax authorities, the Securities and Exchange
Board , any other statutory regulatory body or authority or any person
concerned and an order is made by a court of competent jurisdiction or
the Tribunal to the effect that—
(i) the relevant earlier accounts were prepared in a
fraudulent manner; or
(ii) the affairs of the company were mismanaged during
the relevant period, casting a doubt on the reliability of financial
statements:
Provided that the court or the Tribunal, as the case may be, shall
give notice to the Central Government, the Income-tax authorities, the
Securities and Exchange Board or any other statutory regulatory body or
authority concerned or any other person concerned and shall take
into consideration the representations, if any, made by that Government
or the authorities, Securities and Exchange Board or the body or
authority concerned or the other person concerned before passing any order
under this section.
(2) Without prejudice to the provisions contained in this
Act the accounts so revised or re-cast under sub-section (1)
shall be final.
(3) No order shall be
made under sub-section (1) in respect of re-opening of books of account
relating to a period earlier than eight financial years immediately preceding
the current financial year:
Provided that where a
direction has been issued by the Central Government under the proviso to
sub-section (5) of section 128 for keeping of books of account for a period
longer than eight years, the books of account may be ordered to be re-opened
within such longer period.
|
Amendments
via insertion
Books earlier than period of 8 years will not be reopen until and
unless application is made by any regulatory
|
|
Section 132- Constitution
of National Financial Reporting Authority[1]
|
(1)******
(2)******
(3) ******
(4) ******
(c) where professional or other misconduct is proved,
have the power to make order for—
(A) imposing penalty of—
(I) not less than one lakh rupees, but which may extend
to five times of the fees received, in case of individuals; and
(II) not less than ten lakh rupees, but which may extend to
ten times of the fees received, in case of firms;
(5) Any person aggrieved by any order of the National Financial
Reporting Authority issued under clause (c) of sub-section (4), may prefer an
appeal before the
Appellate Authority constituted under sub-section (6) in such manner as may
be prescribed
(6) ******
(7) ******
(8) ******
(9) ******
(10) ******
(11) ******
(12) ******
(13) ******
(14) ******
(15) ******
|
1)******
(2)******
(3) ******
(4) ******
c)
where professional or other misconduct is proved, have the power to
make order for—
(A) imposing penalty of—
(I) not less than one lakh rupees, but which may extend
to five times of the fees received, in case of individuals; and
(II) not less than five lakh rupees, but which may extend to
ten times of the fees received, in case of firms;
(5)Any person aggrieved by any order of the National Financial
Reporting Authority issued under clause (c) of sub-section (4),
may prefer an appeal before the Appellate Tribunal in such manner and on payment
of such fee as may be prescribed
(6) Omitted
(7) Omitted
(8) Omitted
(9) Omitted
(10) ******
(11) ******
(12) ******
(13) ******
(14) ******
(15) ******
|
Amendment
via substitution and omission:
Self Explanatory
Appeals against NFRA will be heard by NCLAT.
|
|
Section 136- Right of
member to copies of audited financial statement
|
1) Without prejudice to the provisions of section 101, a copy of
the financial statement , including consolidated financial statements, if
any, auditor’s report and every other document required by law to be annexed
or attached to the financial statements, which are to be laid before a
company in its general meeting, shall be sent to every member of the company
, to every trustee for the debenture-holder of any debenture issued by the
company, and to all persons other than such member or trustee, being the
person so entitled, not less than twenty-one days before the date of the
meeting:
Provided that in the case of a listed company , the provisions of this
sub-section shall be deemed to be complied with, if the copies of the
documents are made available for inspection at its registered office during
working hours for a period of twenty-one days before the date of the meeting
and a statement containing the salient features of such documents in the
prescribed form or copies of the documents, as the company may deem fit, is
sent to every member of the company and to every trustee for the holders of
any debentures issued by the company not less than twenty-one days before the
date of the meeting unless the shareholders ask for full financial statements:
Provided further that the Central Government may prescribe
the manner of circulation of
financial statements of companies having such net worth and turnover as may
be prescribed:
Provided also that a listed company shall also place its
financial statements including consolidated financial statements, if any, and
all other documents required to be attached thereto, on its website, which is
maintained by or on behalf of the company:
Provided also that every company having a subsidiary or
subsidiaries shall,—
(a) place separate audited accounts in respect of each of its
subsidiary on its website, if any;
(b) provide a copy of separate audited financial statements in
respect of each of its subsidiary, to any shareholder of the company who asks
for it.
(2) A company shall allow every member or trustee of the
holder of any debentures issued by the company to inspect the documents
stated under sub-section (1) at its registered office during business
hours.
(3) If any default is made in complying with the
provisions of this section, the company shall be liable to a penalty of
twenty-five thousand rupees and every officer of the company who is
in default shall be liable to a penalty of five thousand rupees.
|
1)
"Provided that if the
copies of the documents are sent less than twenty-one days before the date of
the meeting, they shall, notwithstanding that fact, be deemed to have been
duly sent if it is so agreed by members—
(a) holding, if the company
has a share capital, majority in number entitled to vote and who represent
not less than ninety-five per cent. of such part of the paid-up share capital
of the company as gives a right to vote at the meeting; or
(b) having, if the company
has no share capital, not less than ninetyfive per cent. of the total voting
power exercisable at the meeting
Provided further thatin the case of a listed
company , the provisions of this sub-section shall be deemed to be complied
with, if the copies of the documents are made available for inspection at its
registered office during working hours for a period of twenty-one days before
the date of the meeting and a statement containing the salient features of
such documents in the prescribed form or copies of the documents, as the
company may deem fit, is sent to every member of the company and to every
trustee for the holders of any debentures issued by the company not less than
twenty-one days before the date of the meeting unless the shareholders ask
for full financial statements:
Provided also that the
Central Government may prescribe the
manner of circulation of financial statements of companies having such
net worth and turnover as may be prescribed:
Provided also that a listed company shall also place its
financial statements including consolidated financial statements, if any, and
all other documents required to be attached thereto, on its website, which is
maintained by or on behalf of the company:
'Provided also that every
listed company having a subsidiary or subsidiaries shall place separate
audited accounts in respect of each of subsidiary on its website, if any:
Provided also that a listed company which has a subsidiary incorporated
outside India (herein referred to as "foreign subsidiary")—
(a) where such foreign
subsidiary is statutorily required to prepare consolidated financial
statement under any law of the country of its incorporation, the requirement
of this proviso shall be met if consolidated financial statement of such foreign
subsidiary is placed on the website of the listed company;
(b) where such foreign
subsidiary is not required to get its financial statement audited under any
law of the country of its incorporation and which does not get such financial
statement audited, the holding Indian listed company may place such unaudited
financial statement on its website and where such financial statement is in a
language other than English, a translated copy of the financial statement in
English shall also be placed on the website.
(2) A company shall allow every member or trustee of the holder
of any debentures issued by the company to inspect the documents stated under
sub-section (1) at its registered office during business hours.
"Provided
that every company having a subsidiary or subsidiaries shall provide a copy
of separate audited or unaudited financial statements, as the case may be, as
prepared in respect of each of its subsidiary to any member of the company
who asks for it.
(3) If any default is made in complying with the provisions of
this section, the company shall be liable to a penalty of twenty-five
thousand rupees and every officer of the company who is in default shall be
liable to a penalty of five thousand rupees.
|
Amendment
via omission, substitution and insertion:
Please
note :
Section
101 of the Companies Act, 2013 specifically provides that a company shall give a clear notice
of not less than 21 days for calling a general meeting, whether annual
general meeting or any other general meeting. This time section specifically
mentioned the word clear 21 days which were not there in
Companies Act 1956.
Connectivity
of Section 101 with Section 136
Section 136 of the Companies Act 2013, talked about right of
member to copies of audited financial statements. As per section
136(1), without prejudice to the provisions of section 101, a
copy of the financial statements, including consolidated financial
statements, if any, auditor's report and every other document required by law
to be annexed or attached to the financial statements, shall be sent to every
member of the company along with other specified persons, not less than
twenty-one (21) days before the date of the meeting.
Both
section 101 and 136 prescribed the limit of 21 days. Accordingly most of the
Companies send notice of AGM along with Financial Statements together to
comply with the time line of 21 days
Compliance
with section 136 in case of Meeting at shorter notice
In case Accounts are not ready on time, Company can propose to
call AGM on shorter notice. In this scenario one can easily comply with the
provisions related to calling of AGM on shorter notice. But now how to comply
with the time line of 21 days given in section 136?
Therefore amendment bought the same in line:
copies of audited financial statements and other documents may
be sent at shorter notice if duly agreed by:
majority in number entitled to vote and who represent not less
than ninety-five per cent. of such part of the paid-up share capital of the
company as gives a right to vote at the meeting;
ninety five percent of members entitled to vote at the meeting
agree for the same.
Fourth
proviso:
Related to foreign subsidiaries:
Self Explanatory:
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|
Section 140- Removal,
Resignation of Auditor and giving of special notice
|
(3) If the auditor does not comply with sub-section (2),
he or it shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to
five lakh rupees.
|
(3) If the auditor does not comply with sub-section (2),
he or it shall be punishable with fine which shall not be less than "fifty thousand rupees or the remuneration of the
auditor, whichever is less but which may extend to five lakh rupees.
|
If Auditor, who fails to file a staewment of resignation in
prescribed form with registrar, then he shall be laible to penalty which
shall not which shall not be less than "fifty thousand rupees or the
remuneration of the auditor, whichever is less but which may extend to
five lakh rupees.
|
|
Section 141- Eligibility,
Qualification and Disqualifications of Auditors
|
(3) None of the following persons shall be eligible for
appointment as an auditor of a company, namely:—
(a)******
(b)*****
(c)*****
(d) a person who, or his relative or
partner—
(i) is holding any security of the
company or its subsidiary , or of its holding or associate
company or a subsidiary of such holding company , of
value in terms of such percentage as may be prescribed;
(ii) is indebted to the company, or its subsidiary,
or its holding or associate company or a subsidiary of such holding company;
or
(iii) has given a guarantee or provided any
security in connection with the indebtedness of any third person to the
company, or its subsidiary, or its holding or associate company or a subsidiary
of such holding company, for such amount as may be prescribed;
(e) *******;
(f) *******
(g)*******
(h) ******;
(i) *******
|
(3) None of the following persons shall be eligible for
appointment as an auditor of a company, namely:—
(a)******
(b)*****
(c)*****
(d) a person who, or his relative or
partner—
(i) a person
who, directly or indirectly, renders any service referred to in section 144
to the company or its holding company or its subsidiary company.
Explanation.—For the
purposes of this clause, the term "directly or indirectly" shall
have the meaning assigned to it in the Explanation to section 144
;
(ii) is indebted to the company, or its subsidiary,
or its holding or associate company or a subsidiary of such holding company;
or
(iii) has given a guarantee or provided any
security in connection with the indebtedness of any third person to the
company, or its subsidiary, or its holding or associate company or a
subsidiary of such holding company, for such amount as may be
prescribed;
(e) *******;
(f) *******
(g)*******
(h) ******;
(i) *******
|
Amendment via substitution:
|
|
Section 143- Powers and
duties of auditors and auditing standards
|
(1)The
first proviso read as follow:
Provided
that the auditor of a company which is a holding company shall also have the right of access to the
records of all its subsidiaries
insofar as it relates to the consolidation of its financial statement with that of its subsidiaries.
(3)The
auditor’s report shall also state—
(i) whether
the company has adequate
(14) The provisions of this section
shall mutatis mutandis apply to—
(a) cost accountant in practice conducting cost
audit under section 148; or
(b) the conducting
secretarial audit under section 204.
|
The first proviso:
Provided that the auditor of a company which is a holding
company shall also have the right of
access to the records of all its subsidiaries and associate companies insofar as it relates to
the consolidation of its financial statement
with that of its subsidiaries its subsidiaries and associate companies .
(3)The
auditor’s report shall also state—
(i) whether
the company has adequate
(14) The provisions of this section
shall mutatis mutandis apply to—
(a) cost accountant conducting cost audit under section 148;
or
(b) the conducting
secretarial audit under section 204.
|
Amendment
via substitution, insertion in sub section (1), (3) and (14)
Access also given to associate
companies as well.
Auditors responsibility of
reposrting is restricted nto financial statements only they will not be
required to report on business controls
More clarity
|
|
Section 147- Punishment for
contravention
|
2)
If an auditor of a company contravenes any of the provisions of section
139, section 143, section 144 or section 145, the auditor shall be
punishable with fine which shall not be less than twenty-five thousand
rupees but which may extend to five lakh rupees or four times the remuneration of
the auditor, whichever is less:
Provided that if an auditor has contravened such provisions
knowingly or wilfully with the intention to deceive the company or its
shareholders or creditors or tax authorities, he shall be punishable
with imprisonment for a term which may extend to one year and with fine
which shall not be less than one lakh rupees but which may extend to
twenty-five lakh rupees
|
2)
If an auditor of a company contravenes any of the provisions of section
139, section 143, section 144 or section 145, the auditor shall be
punishable with fine which shall not be less than twenty-five thousand
rupees but which may extend to five lakh rupees or four times the remuneration
of the auditor, whichever is less:
Provided that if an auditor has contravened such provisions
knowingly or wilfully with the intention to deceive the company or its
shareholders or creditors or tax authorities, he shall be punishable
with imprisonment for a term which may extend to one year
|
Amendment
via substitution, insertion in sub section (2), (3) and (5)
Revision in penalty provision
|
|
Section 148- Central
Government to specify audit of items of Cost in respect of Certain Companies
|
(3) Where a company includes the particulars relating to items
of cost in the books of account in pursuance of a resolution passed by the
company, the audit of cost records as contained in the books of account of
the company shall be conducted by a "Cost Accountant in practice who shall be
appointed by the Board on such remuneration as may
be determined by the members in such manner as may be
prescribed :
Provided that no person appointed under section 123 as an auditor
of the company shall be appointed for conducting the audit of cost records.
Provided further that the auditor conducting the cost audit shall comply
with the cost auditing standards.
Explanation.—For the purposes of this sub-section, the expression “cost
auditing standards” mean such standards as are issued by the Institute of Cost and Works
Accountants of India, constituted under the Cost and Works
Accountants Act, 1959, with the approval of the Central Government.
(5) The qualifications, disqualifications, rights, duties and
obligations applicable to auditors under this Chapter shall, so far as may be
applicable, apply to a cost auditor appointed under this section and it shall
be the duty of the company to give all assistance and facilities to the cost
auditor appointed under this section for auditing the cost records of the
company :
Provided that the report on the audit of cost records shall be
submitted by cost
accountant in practice to the Board of Directors of the
company.
|
(3) Where a company includes the particulars relating to items
of cost in the books of account in pursuance of a resolution passed by the
company, the audit of cost records as contained in the books of account of
the company shall be conducted by a cost accountant who shall be appointed by
the Board on such remuneration as may be determined
by the members in such manner as may be prescribed :
Provided that no person appointed under section 123 as an auditor
of the company shall be appointed for conducting the audit of cost records.
Provided further that the auditor conducting the cost audit shall comply
with the cost auditing standards.
Explanation.—For the purposes of this sub-section, the expression “cost
auditing standards” mean such standards as are issued by the Institute of Cost Accountants of
India, constituted under the Cost and Works Accountants Act, 1959,
with the approval of the Central Government.
(5) The qualifications, disqualifications, rights, duties and
obligations applicable to auditors under this Chapter shall, so far as may be
applicable, apply to a cost auditor appointed under this section and it shall
be the duty of the company to give all assistance and facilities to the cost
auditor appointed under this section for auditing the cost records of the
company :
Provided that the report on the audit of cost records shall be
submitted by cost accountant to
the Board of Directors of the company.
|
Amendment
via substitution in sub section (3) and (5)
Self explantory
|
|
Section 152- Appointment of
directors
|
3)
No person shall be appointed as a director of a company unless he has
been allotted the Director Identification Number under section 154.
(4) Every person proposed to be appointed as a director
by the company in general meeting or otherwise, shall furnish his
Director Identification Number and a declaration that he is not
disqualified to become a director under this Act.
|
3)
No person shall be appointed as a director of a company unless he has
been allotted the Director Identification Number under section 154 or any other number as
may be prescribed under section 153.
(4) Every person proposed to be appointed as a director
by the company in general meeting or otherwise, shall furnish his
Director Identification Number or such other number as may be prescribed under section
153 and a declaration that he is not disqualified to become a
director under this Act.
|
Amendment
via insertion in sub section (3) and (4)
Bought in line with section 153, explained next
|
|
Section 153- Application
for allotment of Director Identification Number
|
Every individual intending to be appointed as director of
a company shall make an application for allotment
of Director Identification Number to the Central
Government in such form and manner and along with such fees
as may be prescribed.
|
Every individual intending to be appointed as director of
a company shall make an application for allotment
of Director Identification Number to the Central
Government in such form and manner and along with such fees
as may be prescribed.
Provided that the
Central Government may prescribe any identification number which shall be
treated as Director Identification Number for the purposes of this Act and in
case any individual holds or acquires such identification number, the
requirement of this section shall not apply or apply in such manner as may be
prescribed.
|
Amendment
via insertion of proviso
Any person to whom identification number is allotted by aCentral
Government will not be required to make any application for alloment of DIN
and such identication number will be
treated as DIN
|
|
Section 160- Right of persons
other than retiring directors to stand for directorship
|
(1) A person who is not a retiring director in terms of
section 152 shall, subject to the provisions of this Act, be eligible
for appointment to the office of a director at any general
meeting, if he, or some member intending to propose him as a
director, has, not less than fourteen days before the meeting, left at the
registered office of the company, a notice in writing under his hand
signifying his candidature as a director or, as the case may be, the
intention of such member to propose him as a candidate for that office, along
with the deposit of one lakh rupees or such higher amount as may be
prescribed which shall be refunded to such person or, as the case may be, to
the member, if the person proposed gets elected as a director or gets more
than twenty-five per cent. of total valid votes cast either on show of hands
or on poll on such resolution.
(2) The company shall inform its members of the
candidature of a person for the office of director under sub-section (1)
in such manner as may be prescribed.
|
(1) A person who is not a retiring director in terms of
section 152 shall, subject to the provisions of this Act, be eligible
for appointment to the office of a director at any general
meeting, if he, or some member intending to propose him as a
director, has, not less than fourteen days before the meeting, left at the
registered office of the company, a notice in writing under his hand
signifying his candidature as a director or, as the case may be, the
intention of such member to propose him as a candidate for that office, along
with the deposit of one lakh rupees or such higher amount as may be
prescribed which shall be refunded to such person or, as the case may be, to
the member, if the person proposed gets elected as a director or gets more
than twenty-five per cent. of total valid votes cast either on show of hands
or on poll on such resolution.
Provided
that requirements of deposit of amount shall not apply in case of
appointment of an independent director or a director recommended by the
Nomination and Remuneration Committee, if any, constituted under sub-section
(1) of section 178 or a director recommended by the Board of Directors of the
Company, in the case of a company not required to constitute Nomination and
Remuneration Committee.
(2) The company shall inform its members of the
candidature of a person for the office of director under sub-section (1)
in such manner as may be prescribed.
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Amendment
via insertion of proviso to sub section (1)
Every person other than retiring director eligible for
appointment as director shall deposit amount with company as may be
prescribed which will be refunded if person gets elected as director or gets
25% of total valid votes.
However deposits will not be required in case company appointing
Independent Deirector or director recommended by NRC or board
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Section 161- Appointment of
Additional director, Alternate director and Nominee director
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(1)******
(2) The Board of Directors of a company may, if so
authorised by its articles or by a resolution passed by the company in
general meeting, appoint a person, not being a person holding any alternate
directorship for any other director in the company or holding
directorship in the same company, to act as an alternate director for a
director during his absence for a period of not less than three months from
India:
Provided ******:
Provided further ******:
Provided also ********
(3)*******
(4) In
case of Public Company if the office of any director
appointed by the company in general meeting is vacated before his term
of office expires in the normal course, the resulting casual vacancy may, in
default of and subject to any regulations in the articles of the company, be
filled by the Board of Directors at a meeting of the
Provided that any person so appointed shall hold office only up
to the date up to which the director in whose place he is appointed
would have held office if it had not been vacated.
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(1)******
(2) The Board of Directors of a company may, if so
authorised by its articles or by a resolution passed by the company in
general meeting, appoint a person, not being a person holding any alternate
directorship for any other director in the company or holding directorship in the same
company, to act as an alternate director for a director during his
absence for a period of not less than three months from India:
Provided ******:
Provided further ******:
Provided also ********
(3)*******
(4)
Provided that any person so appointed shall hold office only up
to the date up to which the director in whose place he is appointed
would have held office if it had not been vacated.
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Amendment via insertion ans substitution.
Any person holding directorship cannot be appo=inted as
aleternate director in same company
Now applicability as extended to all companies earlier it was
restricted to public companies only.
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Section 165- Number of
Directorship
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(1) No person, after the
commencement of this Act, shall hold office as a director , including any alternate
directorship, in more than twenty companies at the same time:
Provided that the maximum number of public companies in which a
person can be appointed as a director shall not exceed ten.
Explanation.— For reckoning the limit of
public companies in which a person can be appointed as director, directorship
in private companies that are either holding or subsidiary company of a
public company shall be included.
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(1) No person, after the
commencement of this Act, shall hold office as a director , including any alternate
directorship, in more than twenty companies at the same time:
Provided that the maximum number of public companies in which a
person can be appointed as a director shall not exceed ten.
Explanation I.
Explanation II.—For
reckoning the limit of directorships of twenty companies, the directorship in
a dormant company shall not be included.
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Amendment
via insertion of new Explanation Clause
Self Explnatory.
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Section 180- Restrictions
on powers of board
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The Board of Directors of a company shall exercise the following
powers only with the consent of the company by a special resolution, namely-
(c) to borrow money, where the money to be borrowed, together with the money
already borrowed by the company will exceed aggregate of its paid-up share
capital and free reserves, apart from temporary loans obtained from
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Section 184- Disclosure of
interest by directors
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(1)*****
(2)*****
(3)*****
(4) If a director of the company contravenes the
provisions of sub-section (1) or subsection(2), such director
shall be punishable with imprisonment for a term which may extend to one
year or with fine which shall not be less than fifty thousand rupees but
which may extend to one lakh rupees, or with both.
(5) Nothing in this section—
(a) shall be taken to prejudice the operation of any rule
of law restricting a director of a company from having any concern or
interest in any contract or arrangement with the company;
(b) shall apply to any contract or arrangement entered
into or to be entered into between two companies where any of the
directors of the one company or two or more of them together holds or hold
not more than two per cent. of the paid-up share capital in
the other company.
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(1)*****
(2)*****
(3)*****
(4) If a director of the company contravenes the
provisions of sub-section (1) or subsection(2), such director
shall be punishable with imprisonment for a term which may extend to one
year or with fine which
(5) Nothing in this section—
(a) shall be taken to prejudice the operation of any rule
of law restricting a director of a company from having any concern or
interest in any contract or arrangement with the company;
(b) shall apply to
any contract or arrangement entered into or to be entered into between two
companies or between one or more companies and one or more bodies corporate
where any of the directors of the one company or body corporate or two or
more of them together holds or hold not more than two per cent. of the
paid-up share capital in the other company or the body corporate.".
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Amendment via substitution and omission:
Omission of minimum pealty clause.
To exempt body corporate where any director or two or more of them holds or hold not more
than 2% of the paid-up share capital, from the purview of section. to align
it with the provisions of section 184(2).
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Section 188- Related Party
Transactions
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(1) Except with the consent of the Board of Directors given by a resolution at a meeting of the
Board and subject to such conditions as may be prescribed, no company shall
enter into any contract or arrangement with a related party with respect to—
(a) sale, purchase or supply of any goods or materials;
(b) selling or otherwise disposing of, or buying, property of
any kind;
(c) leasing of property of any kind;
(d) availing or rendering of any services;
(e) appointment of any agent for purchase or sale of goods,
materials, services or property;
(f) such related party’s appointment to any office or place of
profit in the company, its subsidiary company or associate company; and
(g) underwriting the subscription of any securities or
derivatives thereof, of the company:
Provided that no contract or arrangement, in the case of a
company having a paid-up share capital
of not less than such amount, or transactions not exceeding such sums,
as may be prescribed, shall be entered into except with the prior approval of
the company by a special resolution resolution:
Provided further that no member of the company shall vote on
such resolution, to approve any contract or arrangement which may be entered
into by the company, if such member is a related party
Provided also that nothing in this sub-section shall apply to
any transactions entered into by the company in its ordinary course of
business other than transactions which are not on an arm’s length basis.
Provided also that the requirement of passing the resolution
under first proviso shall not be applicable for transactions entered into
between a holding company and its wholly owned subsidiary whose accounts are
consolidated with such holding company and placed before the shareholders at
the general meeting for approval.
Explanation.— In this sub-section,—
(a) the expression “office or place of profit” means any office
or place—
(i) where such office or place is held by a director, if the
director holding it receives from the company anything by way of remuneration
over and above the remuneration to which he is entitled as director, by way
of salary, fee, commission, perquisites, any rent-free accommodation, or
otherwise;
(ii) where such office or place is held by an individual other
than a director or by any firm, private company or other body corporate , if
the individual, firm, private company or body corporate holding it receives
from the company anything by way of remuneration, salary, fee, commission,
perquisites, any rent-free accommodation, or otherwise;
(b) the expression “arm’s length transaction” means a
transaction between two related parties that is conducted as if they were
unrelated, so that there is no conflict of interest.
(2)*****
(3) Where any contract or
arrangement is entered into by a director or any other employee, without
obtaining the consent of the Board or approval by a resolution in
the general meeting under sub-section (1) and if it is not ratified by
the Board or, as the case may be, by the shareholders at a meeting within
three months from the date on which such contract or arrangement was entered
into, such contract or arrangement
shall be voidable at the option of the Board and if the contract or
arrangement is with a related party to any director, or is authorised by any
other director, the directors concerned shall indemnify the company against
any loss incurred by it
(4)*****
(5)*****
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(1) Except with the consent of the Board of Directors given by a resolution at a meeting of the
Board and subject to such conditions as may be prescribed, no company shall
enter into any contract or arrangement with a related party with respect to—
(a) sale, purchase or supply of any goods or materials;
(b) selling or otherwise disposing of, or buying, property of
any kind;
(c) leasing of property of any kind;
(d) availing or rendering of any services;
(e) appointment of any agent for purchase or sale of goods,
materials, services or property;
(f) such related party’s appointment to any office or place of
profit in the company, its subsidiary company or associate company; and
(g) underwriting the subscription of any securities or
derivatives thereof, of the company:
Provided that no contract or arrangement, in the case of a
company having a paid-up share capital
of not less than such amount, or transactions not exceeding such sums,
as may be prescribed, shall be entered into except with the prior approval of
the company by a special resolution resolution:
Provided further that no member of the company shall vote on
such resolution, to approve any contract or arrangement which may be entered
into by the company, if such member is a related party
Provided also that nothing
contained in the second proviso shall apply to a company in which ninety per
cent. or more members, in number, are relatives of promoters or are related
parties
Provided also that nothing in this sub-section shall apply to
any transactions entered into by the company in its ordinary course of
business other than transactions which are not on an arm’s length basis.
Provided also that the requirement of passing the resolution
under first proviso shall not be applicable for transactions entered into
between a holding company and its wholly owned subsidiary whose
accounts are consolidated with such holding company and placed
before the shareholders at the general meeting for approval.
Explanation.— In this sub-section,—
(a) the expression “office or place of profit” means any office
or place—
(i) where such office or place is held by a director, if the
director holding it receives from the company anything by way of remuneration
over and above the remuneration to which he is entitled as director, by way
of salary, fee, commission, perquisites, any rent-free accommodation, or
otherwise;
(ii) where such office or place is held by an individual other
than a director or by any firm, private company or other body corporate , if
the individual, firm, private company or body corporate holding it receives
from the company anything by way of remuneration, salary, fee, commission,
perquisites, any rent-free accommodation, or otherwise;
(b) the expression “arm’s length transaction” means a
transaction between two related parties that is conducted as if they were
unrelated, so that there is no conflict of interest.
(2)*****
(3) Where any contract or
arrangement is entered into by a director or any other employee, without
obtaining the consent of the Board or approval by a resolution in
the general meeting under sub-section (1) and if it is not ratified by
the Board or, as the case may be, by the shareholders at a meeting within
three months from the date on which such contract or arrangement was entered
into, such contract or arrangement "shall be voidable at the option of the Board or, as
the case may be, of the shareholders and if the contract or
arrangement is with a related party to any director, or is authorised by any
other director, the directors concerned shall indemnify the company against
any loss incurred by it
(4)*****
(5)*****
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Amednment
via insertion ans substitution:
It provides that second proviso; i.e voting on special
resolution will not be required if 90% of members of companies are relatives
of promoters or related parties, specially to excludes closly held companies
from this ambit.
Earlier, as per 2013 Act, no member will vote oon ordinary
resolution if they are related, this created problem for closely heald
company where every shareholder were related to each other
As peer section 188(3) every contract or arrangement on which
consent has not been obtained by board or where it is not passed by ordinary
resolution by shareholder such contracts or arrangement shall be voidable at
option of board, Now, the amendment states that apart from being voidable at
option of board , it will also be voidable at option of shareholders now.
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Section 195- Prohibition on
Insider trading of securities
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Omitted
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Omitted
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Section 223- Inspector’s
report
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(1) An inspector appointed under this Chapter may, and if so
directed by the Central Government shall, submit interim reports to that
Government, and on the conclusion of the investigation, shall submit a final
report to the Central Government.
(2) Every report made under sub-section (1) shall be in writing
or printed as the Central Government may direct.
(3) A copy of the report made under sub-section (1) may be
obtained by making an application in this regard to the Central Government.
(4) The report of any inspector appointed under this Chapter
shall be authenticated either—
(a) by the seal by the
seal, if any of the company whose affairs have been investigated; or
(b) by a certificate of a public officer having the custody of
the report, as provided under section 76 of the Indian Evidence Act, 1872,
and such report shall be admissible in any legal proceeding as evidence in
relation to any matter contained in the report.
(5) Nothing in this section shall apply to the report referred
to in section 212.
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(1) An inspector appointed under this Chapter may, and if so
directed by the Central Government shall, submit interim reports to that
Government, and on the conclusion of the investigation, shall submit a final
report to the Central Government.
(2) Every report made under sub-section (1) shall be in writing
or printed as the Central Government may direct.
(3) A copy of the report made under sub-section (1) may be
obtained "by
members, creditors or any other person whose interest is likely to be
affected by
making an application in this regard to the Central Government.
(4) The report of any inspector appointed under this Chapter
shall be authenticated either—
(a) by the seal by the
seal, if any of the company whose affairs have been investigated; or
(b) by a certificate of a public officer having the custody of
the report, as provided under section 76 of the Indian Evidence Act, 1872,
and such report shall be admissible in any legal proceeding as evidence in
relation to any matter contained in the report.
(5) Nothing in this section shall apply to the report referred
to in section 212.
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Amendments via insertion in sub
section (3) of section 233:
Report is
likely to be made available to only those person whose interest likely to be
affected.
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Section 236- Purchase of
Minority Shareholding
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(4) The majority shareholders shall deposit an amount
equal to the value of shares to be acquired by them under sub-section (2)
or sub-section (3), as the case may be, in a separate bank
account to be operated by the transferor company for at least one year for payment to the minority
shareholders and such amount shall be disbursed to the
entitled shareholders within sixty days:
Provided that such disbursement shall continue to be made to the
entitled shareholders for a period of one year, who for any reason had
not been made disbursement within the said period of sixty days or
if the disbursement have been made within the aforesaid period of sixty
days, fail to receive or claim payment arising out of such disbursement.
(5) In the event of a purchase under this section, the transferor company shall act as a
transfer agent for receiving and paying the price to the minority
shareholders and for taking delivery of the shares and delivering such
shares to the majority, as the case may be.
(6) In the absence of a physical delivery of shares by
the shareholders within the time specified by the company, the share
certificates shall be deemed to be cancelled, and the transferor company shall be authorised to
issue shares in lieu of the cancelled shares and complete the transfer in
accordance with law and make payment of the price out of deposit made under
sub-section (4) by the majority in advance to the minority by despatch
of such payment
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(4) The majority shareholders shall deposit an amount
equal to the value of shares to be acquired by them under sub-section (2)
or sub-section (3), as the case may be, in a separate bank
account to be operated by the “company whose shares are being transfered for at least one year
for payment to the minority shareholders and such amount shall be
disbursed to the entitled shareholders within sixty days:
Provided that such disbursement shall continue to be made to the
entitled shareholders for a period of one year, who for any reason had
not been made disbursement within the said period of sixty days or
if the disbursement have been made within the aforesaid period of sixty
days, fail to receive or claim payment arising out of such disbursement.
(5) In the event of a purchase under this section, the “company whose shares are being
transfered
are being shall act as a transfer agent for receiving and paying the
price to the minority shareholders and for taking delivery of the shares
and delivering such shares to the majority, as the case may be.
(6) In the absence of a physical delivery of shares by
the shareholders within the time specified by the company, the share
certificates shall be deemed to be cancelled, and the “company whose shares are being
transfered
are being shall be authorised to issue shares in lieu of the cancelled shares
and complete the transfer in accordance with law and make payment of the
price out of deposit made under sub-section (4) by the majority in
advance to the minority by despatch of such payment
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Amendments
via substitution in sub-sections (4), (5) and (6) of section 236:
The changes are clarificatory in nature.
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Section 247- Valuation by
Registered Valuers
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(2)The valuer appointed under sub-section (1) shall,—
(a) make an impartial, true and fair valuation of any assets
which may be required to be valued;
(b) exercise due diligence while performing the functions as
valuer;
(c) make the valuation in accordance with such rules as may be
prescribed; and
(d) not undertake valuation of any assets in which he has a
direct or indirect interest or becomes so interested at any time during or after the valuation of
assets.
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(2)The valuer appointed under sub-section (1) shall,—
(a) make an impartial, true and fair valuation of any assets
which may be required to be valued;
(b) exercise due diligence while performing the functions as
valuer;
(c) make the valuation in accordance with such rules as may be
prescribed; and
(d) not undertake valuation of any assets in which he has a
direct or indirect interest or becomes so interested at any time during a period of three years
prior to his appointment as valuer or three years after the valuation of
assets was conducted by him
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Amendment
via substitution in sub section (2) of section 247:
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Section 379- Application of
Act to foreign companies
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Where not less than fifty per cent. of the paid-up share
capital , whether equity or preference or partly equity and partly
preference, of a foreign company is held by one or more
citizens of India or by one or more companies or bodies corporate
incorporated in India, or by one or more citizens of India and one or more
companies or bodies corporate incorporated in India, whether singly or in the
aggregate, such company shall comply with the provisions of this Chapter and
such other provisions of this Act as may be prescribed with regard
to the business carried on by it in India as if it were a company
incorporated in India.
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"(1) Sections 380 to
386 (both inclusive)and sections 392 and 393 shall apply to all foreign
companies: Provided that the Central Government may, by Order published in
the Official Gazette, exempt any class of foreign companies, specified in the
Order, from any of the provisions of sections 380 to 386 and sections 392 and
393 and a copy of every such order shall, as soon as may be after it is made,
be laid before both Houses of Parliament."
(2)Where not less than fifty per
cent. of the paid-up share capital , whether equity
or preference or partly equity and partly preference, of a foreign
company is held by one or more citizens of India or by one or more
companies or bodies corporate incorporated in India, or by one or more
citizens of India and one or more companies or bodies corporate incorporated
in India, whether singly or in the aggregate, such company shall comply with
the provisions of this Chapter and such other provisions of this Act as
may be prescribed with regard to the business carried on by it in India
as if it were a company incorporated in India
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Amendment via insertion carried of sub section (1) in section
379:
It provides that section 380 to 386 and 392 and 393 will aplly
to foreign company, further Central Government is empowered to exempt any
class of foreign companies to exempt from the provisions of section 380 to
386 and 392 and 393.
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Section 384- Debentures,
Annual Return, Registration of charges, books of account and their Inspection
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(2) The provisions of section 92 shall, subject to such
exceptions, modifications and adaptations as may be made therein
by rules made under this Act, apply to a foreign company as they
apply to a company incorporated in India.
Provided notwithstanding anything contained in this Act, the
exemptions provided under section 92 to companies incorporated under this Act
for the purpose of operating from the International Financial Services Centre
located in an approved multi services Special Economic Zone set-up under the
Special Economic Zones Act, 2005 (28 of 2005) and the Special Economic Zones
Rules, 2006, shall apply mutatis mutandis to a foreign company registered
under Chapter XXII of this Act, which has a place of business or which
conducts business activity from the International Financial Services Centre
located in an approved multi services Special Economic Zone set-up under the
Special Economic Zones Act, 2005 and the Special Economic Zones Rules, 2006.
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(2) The provisions of section 92 and section 135 shall,
subject to such exceptions, modifications and adaptations as may be made
therein by rules made under this Act, apply to a foreign company as
they apply to a company incorporated in India.
Provided notwithstanding anything contained in this Act, the
exemptions provided under section 92 to companies incorporated under this Act
for the purpose of operating from the International Financial Services Centre
located in an approved multi services Special Economic Zone set-up under the
Special Economic Zones Act, 2005 (28 of 2005) and the Special Economic Zones
Rules, 2006, shall apply mutatis mutandis to a foreign company registered
under Chapter XXII of this Act, which has a place of business or which
conducts business activity from the International Financial Services Centre
located in an approved multi services Special Economic Zone set-up under the
Special Economic Zones Act, 2005 and the Special Economic Zones Rules, 2006.
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Amendment
via insertion carried in sub section (2) of section 384:
It provides applicability of section 135 on foreign companies.
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Section 391- Application of
sections 34 to 36 and Chapter XX
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(1) The provisions of sections 34 to 36 (both inclusive) shall
apply to—
(i) the issue of a prospectus by a company incorporated outside
India under section 389 as they apply to prospectus issued by an Indian
company;
(ii) the issue of Indian Depository Receipt by a foreign company .
(2) The provisions of Chapter XX shall apply mutatis mutandis
for closure of the place of business of a foreign company in India as if it
were a company incorporated in India.
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(1) The provisions of sections 34 to 36 (both inclusive) shall
apply to—
(i) the issue of a prospectus by a company incorporated outside
India under section 389 as they apply to prospectus issued by an Indian
company;
(ii) the issue of Indian Depository Receipt by a foreign company .
“(2)
Subject to the provisions of section 376, the provisions of Chapter XX shall
apply mutatis mutandis for closure of the place of business of a foreign
company in India as if it were a company incorporated in India in case such
foreign company has raised monies through offer or issue of securities under
this Chapter which have not been repaid or redeemed.
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Amendment
via substitution carried in sub section (2) of section 391:
Amendment provides that the provisions of Chapter XX i.e
provisions of winding up to foreign company in India for closure of business
shall apply only if they raised mones and remained unpaid
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Section 409- Qualification
of President and Members of Tribunal
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(3) A person shall not be qualified for appointment as a
Technical Member unless he—
(a) has, for at least fifteen years been a member of the Indian
Corporate Law Service or Indian Legal Service out of which at least three years shall be in the pay
scale of Joint Secretary to the Government of India or equivalent or above in
that service; or
(b) is, or has been, in practice as a chartered accountant for at least fifteen years; or
(c) is, or has been, in practice as a company secretaries for at
least fifteen years; or
(d) is, or has been, in practice as a company secretary for at
least fifteen years; or
(e) is a
person of proven ability, integrity and standing having special knowledge and
experience, of not less than fifteen years, in law, industrial finance,
industrial management or administration, industrial reconstruction,
investment, accountancy, labour matters, or such other disciplines related to
management, conduct of affairs, revival, rehabilitation and winding up of
companies; or
(f) is, or has been, for at least five years, a presiding
officer of a Labour Court, Tribunal or National Tribunal constituted under
the Industrial Disputes Act, 1947.
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(3) A person shall not be qualified for appointment as a
Technical Member unless he—
(a) has, for at least fifteen years been a member of the Indian
Corporate Law Service or Indian Legal Service and has been holding the rank of Secretary or
Additional Secretary to the Government of India; or
(b) is, or has been, in practice as a chartered accountant for at least fifteen years; or
(c) is, or has been, in practice as a company secretaries for at
least fifteen years; or
(d) is, or has been, in practice as a company secretary for at
least fifteen years; or
(e) is a
person of proven ability, integrity and standing having special knowledge and
professional experience of not less than fifteen years in industrial finance,
industrial management, industrial reconstruction, investment and accountancy;or
(f) is, or has been, for at least five years, a presiding
officer of a Labour Court, Tribunal or National Tribunal constituted under
the Industrial Disputes Act, 1947.
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Amendment
via substitution carried in sub section (3) of section 409:
Instead of Joint Secretary to the Government of India, person
who has been holding the rank of Secretary or Additional Secretary to the
Government of India, will be eligible
Expertise in other disciplines like law, labour laws, and
disciplines related to management, conduct of affairs, revival,
rehabilitation and winding-up of companies are deleted from clause (e)
Amendment
has been carried these provisions to bring the same in line with Supreme
Court decision [2]
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Section 411- Qualifications
of Chairperson and Members of Appellate Tribunal
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(3) A Technical Member shall be a person of proven ability,
integrity and standing having special knowledge and experience, of not less
than twenty-five years, in law, industrial finance, industrial management or
administration, industrial reconstruction, investment, accountancy, labour
matters, or such other disciplines related to management, conduct of affairs,
revival, rehabilitation and winding up of companies.
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"(3) A technical member shall be a person of proven
ability, integrity and standing having special knowledge and professional
experience of not less than twenty-five years in industrial finance,
industrial management, industrial reconstruction, investment and
accountancy."
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Amendment
via substitution carried in sub section (3) of section 411:
Amendments relates to the provisions of qualifications for
appointment as Technical member which is brought in sync with the amendment
carried in section 409. It has limited
the areas of expertise to industrial finance, management, or reconstruction,
investment and accountancy
Amendment
has been carried these provisions to bring the same in line with Supreme
Court decision [3]
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Section 412- Selection of
Members of Tribunal and Appellate Tribunal
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(2) The Members of the Tribunal and the Technical Members
of the Appellate Tribunal shall be appointed on the recommendation of a
Selection Committee consisting of—
(a) Chief Justice of India or his nominee—Chairperson;
(b) a senior Judge of the Supreme Court or a Chief Justice of High Court—Member; (c) Secretary in the Ministry of Corporate Affairs—Member; (d) Secretary in the Ministry of Law and Justice—Member; and (e) Secretary in the Department of Financial Services in the Ministry of Finance— Member. |
"(2) The Members of the Tribunal and the Technical Members
of the Appellate Tribunal shall be appointed on the recommendation of a
Selection Committee consisting of—
(a) Chief Justice of India or his nominee - Chairperson;
(b) a senior Judge of the Supreme Court or Chief Justice of High
Court - Member;
(c) Secretary in the Ministry of Corporate Affairs - Member; and
(d) Secretary in the Ministry of Law and Justice - Member.
(2A) Where in a meeting of the Selection Committee, there is
equality of votes on any matter, the Chairperson shall have a casting
vote."
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Amendment
via substitution carried in sub section (2) of section 412;
Amendment relates to the provision for selection of members of
the Tribunal and Appellate Tribunal.
Secretary, Ministry of Finance removed as member of the
Committee.
Chairperson of Selection Committee to have the casting vote, in
case of a tie.
Amendment
has been carried these provisions to bring the same in line with Supreme
Court decision [4]
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Section 441- Compounding of
certain offences
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(1) Notwithstanding anything contained in the Code of
Criminal Procedure, 1973, any offence punishable under this Act (whether
committed by a company or any officer thereof) with fine only, may,
either before or after the institution of any prosecution, be compounded
by—
(a) the Tribunal ; or
(b) where the maximum amount of fine which may be imposed for such offence does not exceed five lakh rupees, by the Regional Director or any officer authorised by the Central Government,
on payment or credit, by the company or, as the case may be, the
officer, to the Central Government of such sum as that Tribunal or the
Regional Director or any officer authorised by the Central Government, as the
case may be, may specify:
Provided that the sum so specified shall not, in any case, exceed
the maximum amount of the fine which may be imposed for the offence so
compounded:
Provided further that in specifying the sum required to be paid or credited
for the compounding of an offence under this sub-section, the sum, if any,
paid by way of additional fee under sub-section (2) of section 403
shall be taken into account:
Provided also that any offence covered under this sub-section by any
company or its officer shall not be compounded if the investigation
against such company has been initiated or is pending under this Act
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(1) Notwithstanding anything contained in the Code of
Criminal Procedure, 1973, any offence punishable under this Act (whether
committed by a company or any officer thereof) not being an offence punishable
with imprisonment only, or punishable with imprisonment and also with fine,
may, either before or after the institution of any prosecution,
be compounded by—
(a) the Tribunal ; or
(b) where the maximum amount of fine which may be imposed for such offence does not exceed five lakh rupees, by the Regional Director or any officer authorised by the Central Government,
on payment or credit, by the company or, as the case may be, the
officer, to the Central Government of such sum as that Tribunal or the
Regional Director or any officer authorised by the Central Government, as the
case may be, may specify:
Provided that the sum so specified shall not, in any case, exceed
the maximum amount of the fine which may be imposed for the offence so
compounded:
Provided further that in specifying the sum required to be paid or credited
for the compounding of an offence under this sub-section, the sum, if any,
paid by way of additional fee under sub-section (2) of section 403
shall be taken into account:
Provided also that any offence covered under this sub-section by any
company or its officer shall not be compounded if the investigation
against such company has been initiated or is pending under this Act
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Amendment
via substitution carried in sub section (1) of section 441;
The Tribunal should have the power to compound offences
punishable with fine as well as offences punishable with imprisonment or fine
or both.
The
provision has now been brought in line with section 621A of the 1956 Act
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Section 446A- Factors for
determining level of punishment
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New Sub section inserted
after section 446:
The court or the Special Court, while deciding the amount of
fine or imprisonment under this Act, shall have due regard to the following
factors, namely:—
(a) size of the company;
(b) nature of business carried on by the company;
(c) injury to public interest;
(d) nature of the default; and
(e) repetition of the default
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The provision has been inserted in light of the amendment made
under section 435: Establishment of Special Courts of the Act, 2013.
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Section 446B- Lesser
penalties for One Person Companies or small companies
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New Sub section inserted
after section 446:
Notwithstanding anything contained in this Act, if a One Person
Company or a small company fails to comply with the provisions of sub-section
(5) of section 92, clause (c) of sub-section (2) of section 117, sub-section
(3) of section 137, such company and officer in default of such company shall
be punishable with fine or imprisonment or fine and imprisonment, as the case
may be, which shall not be more than one-half of the fine or imprisonment or
fine and imprisonment, as the case may be, of the minimum or maximum fine or imprisonment
or fine and imprisonment, as the case may be, specified in such
sections."
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The Amendment provides relief to One person Company and Small
Companies in case of non-compliance of certain provisions of the Act 2013 as
specified therein:
sub-section (5) of section 92 (Annual Return),
clause (c) of sub-section (2) of section 117 (Resolutions and
agreements to be filed),
sub-section (3) of section 137 (Copy of financial statement to
be filed with Registrar)
In such case such company and officer in default of such company
shall be punishable with fine or imprisonment or fine and imprisonment, as
the case may be, which shall not be more than one-half of the fine or
imprisonment or fine and imprisonment, as the case may be, of the minimum or
maximum fine or imprisonment or fine and imprisonment, as the case may be,
specified in such sections
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Section 447- Punishment for
Fraud
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Without prejudice to any liability including repayment of any
debt under this Act or any other law for the time being in force, any
person who is found to be guilty of fraud, shall be punishable
with imprisonment for a term which shall not be less than six months but
which may extend to ten years and shall also be liable to fine which shall
not be less than the amount involved in the fraud, but which may extend to
three times the amount involved in the fraud:
Provided that where the fraud in question involves public interest,
the term of imprisonment shall not be less than three years.
Explanation.—For the purposes of this section—
(i) “fraud” in relation to affairs of a company or
any body corporate , includes any act, omission, concealment
of any fact or abuse of position committed by any person or any other person
with the connivance in any manner, with intent to deceive, to gain undue
advantage from, or to injure the interests of, the company or its
shareholders or its creditors or any other person, whether or not there is
any wrongful gain or wrongful loss;
(ii) “wrongful gain” means the gain by unlawful means of
property to which the person gaining is not legally entitled;
(iii) “wrongful loss” means the loss by unlawful means of
property to which the person losing is legally entitled.
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Without prejudice to any liability including repayment of any
debt under this Act or any other law for the time being in
force, any person who is found to be guilty of fraud, "involving an amount of at
least ten lakh rupees or one percent. of the turnover of the company,
whichever is lower" shall be punishable with imprisonment for
a term which shall not be less than six months but which may extend to ten
years and shall also be liable to fine which shall not be less than the
amount involved in the fraud, but which may extend to three times the amount
involved in the fraud:
Provided that where the fraud in question involves public interest,
the term of imprisonment shall not be less than three years.
"Provided further that
where the fraud involves an amount less than ten lakh rupees or one per cent.
of the turnover of the company, whichever is lower, and does not involve
public interest, any person guilty of such fraud shall be punishable with
imprisonment for a term which may extend to five years or with fine which may
extend to twenty lakh rupees or with both."
Explanation.—For the purposes of this section—
(i) “fraud” in relation to affairs of a company or
any body corporate , includes any act, omission, concealment
of any fact or abuse of position committed by any person or any other person
with the connivance in any manner, with intent to deceive, to gain undue
advantage from, or to injure the interests of, the company or its
shareholders or its creditors or any other person, whether or not there is
any wrongful gain or wrongful loss;
(ii) “wrongful gain” means the gain by unlawful means of
property to which the person gaining is not legally entitled;
(iii) “wrongful loss” means the loss by unlawful means of
property to which the person losing is legally entitled.
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In nutshell:
Fraud
Fraud
Fraud
Fraud involves public interest,
the term of imprisonment shall not be less than three years. |
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Section 458 Delegation by
Central Government of its powers and functions
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(1) The Central Government may,
by notification , and subject to such conditions, limitations
and restrictions as may be specified therein, delegate any of its powers or
functions under this Act other than the power to make rules to such authority
or officer as may be specified in the notification:
Provided that the powers to enforce the provisions contained in
section 194 and section 195 relating to forward dealing and insider
trading shall be delegated to Securities and Exchange Board for listed
companies or the companies which intend to get their securities listed
and in such case, any officer authorised by the Securities and Exchange
Board shall have the power to file a complaint in the court of competent
jurisdiction.
(2) A copy of every notification issued under sub-section
(1) shall, as soon as may be after it is issued, be laid before
each House of Parliament.
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(1) The Central Government may,
by notification , and subject to such conditions, limitations
and restrictions as may be specified therein, delegate any of its powers or
functions under this Act other than the power to make rules to such authority
or officer as may be specified in the notification:
(2) A copy of every notification issued under sub-section
(1) shall, as soon as may be after it is issued, be laid before
each House of Parliament.
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Amendment via omission:
The amendment is made in in light of amendments made in section
194 194(Forward dealings) and 195(Insider trading),
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(AUTHOR-CS ANJALI GORSIA,
COMPANY SECRETARY FROM NAGPUR (MAHARASHTRA) AND CAN BE CONTACTED AT
CSANJALI.GORSIA@GMAIL.COM)
[1] The Union Cabinet chaired by the Prime Minister Shri
Narendra Modi has approved the proposal for establishment of National Financial
Reporting Authority (NFRA) and creation of one post of Chairperson, three posts
of full-time Members and one post of Secretary for NFRA.
The decision aims at
establishment of NFRA as an independent regulator for the auditing profession
which is one of the key changes brought in by the Companies Act, 2013. The
inclusion of the provision in the Act was on the specific recommendations of
the Standing Committee on Finance (in its 21st report).
[2] Madras Bar Association v. Union of India,
[(2015) 8 SCC 583]
[3] Madras Bar Association v. Union of India,
[(2015) 8 SCC 583]
[4] Madras Bar Association v. Union of India,
[(2015) 8 SCC 583]
Informative Sharing
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