1. Critical Aspects of Companies (Amendment) Act, 2017
Ramaswami Kalidas

2. Associate Company- sec 2(6)
Existing Provision
Proposed Change
The term “Significant influence” = control over at least 20% of total share Capital.
Total Share Capital = aggregate of equity share capital + convertible preference share capital [Rule 2(r) of Companies (Specification of Definitions) Rules, 2014]
“Significant influence”
= control over at least 20% of total voting power or control of or participation in business decisions under Agreement.
Voting Power = Equity shares + preference shareholders covered under first proviso of section 47.
“Control”-To carry the meaning as provided by Section2(27)
Note: Change notified on May 07, 2018

3. Joint Venture
Existing Provision
Proposed Change
The term “ Joint venture” has not been defined and is used in the definition of Associate Company in the Act in Section 2(6).
Joint Venture - defined to mean joint arrangement whereby the parties that have joint control of the arrangement , have rights to the net assets of the arrangement .
Proportion of sharing irrelevant.
Note: Change notified on May 07, 2018

4. Debentures -Sec 2(30) Existing Provision Change
Inclusive definition and covers debt instruments which evidence a debt. Could even include other debt instruments not known as Debentures.
Definition - Pruned to exclude the following :
Instruments referred to in Chapter III-D of the RBI Act, Derivatives and MM instruments and
Such other instruments as may be prescribed by government in Consultation with RBI.
Notified on February 09, 2018

5. Associate Company to follow F.Y-Sec 2(41) Holding Company-Sec 2(46)
Associate Company also to align its accounting year to financial year as stated under section 2(41). Presently alignment required only for Subsidiary. Application by associate will lie with NCLT under Rule 67 of NCLT Rules.
Term ‘Associate’ includes a Joint Venture as well.
Holding Company-To include Bodies corporate under Section 2(11).
Notified on February 09, 2018

6. Key Managerial Personnel-Sec.2(51) Net worth –Sec. 2(57)
Addition to list –KMP-Includes Officer one level below the directors in whole time employment as designated by the Board.
Such other Officer as may be prescribed.
Q. Whether Sec 203 applies for such appointment? Ans: No.
Net worth - definition being modified to consider debit/credit balance in P&L Account.
Anomaly in previous definition being set right.
Notified on February 09, 2018

7. Related Party-Sec 2(76)
Existing Clause (viii) substituted by new clause (viii) with insert by which Body corporate (Section 2(11) which is the holding or subsidiary or Associate company of such company ,Subsidiary of holding company to which it is also a subsidiary or
Body corporate which is an Investing company or venturer of a company shall also be a related party.
Investing Company means a body corporate whose investment in the other company results in the other company becoming an associate.
Notified on February 09, 2018

8. Implication of Changes in RP
Earlier Clause (viii) only covered Indian Company
Companies incorporated outside India come into ambit of definition.
Impact-Extends the contours of the definition and ensures alignment with IND AS.
Action point – Re-mapping of related parties to cover above extension in definition.

9. Small Company- Section 2(85) Thresholds Eased
Maximum threshold for-
(A) paid up share capital raised to Rs. 10 crores from Rs. 5 Crores and* .
B)Turnover raised to Rs. 100 crores from Rs. 20 crores.
Notified on February 09, 2018
*substituted for “or” w.e.f
Section 2(87)-Substitution of control over share capital by total voting power-Subsidiary status.
Notified on May 07, 2018
Turnover - Section2(91)- refers to gross revenue recognized in Accounts-Confusion due to previous definition cleared . Confirms position as to Accrual Accounting.

10. Treatment of Company as non-corporate body
New Section 3A (Notified on February 09, 2018)
If number of members fall below statutory minimum and company carries on business for more than six months thereof, every member aware of the above and who continues to be a member shall be severally liable for liabilities contracted during the period.
Section corresponds to Section 11 of 1956 Act and removes anomaly in 2013 Act.

11. Provisions relating to Memorandum of Association - Sec 4 (5)(i)
Reservation of name both for incorporation and change- only for twenty days instead of 60 days.
However, the Proviso added states that in case of change in name for existing company reservation for 60 days.
Proviso contradicts above sub-section for an existing company.
Anomaly needs to be addressed.
Proposal in Amendment Bill 2016 to make objects clause open- ended removed in 2017 version
Not yet notified

12. Section 12-Time line for having Registered office Address upon incorporation extended to thirty days -Previous 15 days. For notifying change to ROC, period extended to 30 days from 15 days
Not yet notified
Section 21-Authentication of documents can now be by KMPs, Officers and Employees . Previous only KMPs and Officers.
Critique – Amendment to include employee unnecessary considering that Officer under Section 2(59) already includes any person authorized by the Board.
Notified on February 09, 2018

13. Section 26 - Prospectus
Clauses (a), (b) and (d) under Section 26(1) setting out information to be included in Prospectus deleted to align with disclosure requirements under SEBI Rules and Regulations.
Notified on May 07, 2018

14. Section 42 - Substituted Major implications over existing Section
No right of renunciation in private placement.
No utilization of funds raised till allotment is made and return filed.
Penalty for non-filing of return of allotment inserted (Rs. 1k per day not exceeding Rs. 25Lacs)
Penalty for contravention of Section reduced from amount involved in offer or Rs. 2 Cr, whichever higher TO whichever lower.
Not yet Notified

15. Changes in provisions relating to Public Deposits
Section 73(2)(i)(c) – Limit for maintenance of Liquid Assets on maturing Deposits –Up from existing 15% to 20% of deposits maturing during following financial year.
Previous requirement - 15% of amounts due for repayments both in current financial year and following year.
Implication-Lesser Quantum to be kept as contingency deposit in liquid unencumbered Accounts.
Requirement of Deposit Insurance - Dispensed through Deletion of Section 73(2)(d).
Not yet notified.

16. Changes in provisions relating to Public Deposits
Section 73(2)(e)- Relaxation of Eligibility to raise deposits
At present– Company to certify no default in repayment of principal or in payment of interest on amounts raised either before or after the commencement of Act.
Provision being eased. Where default had occurred, company can raise deposits subject to having made good the default and five years have elapsed from the date of making good the default.
Not Notified

17. Changes in provisions relating to Public Deposits
Section 74 - Repayment period for Deposits taken under old Act extended to within three years of commencement of new Act or before expiry of period of deposit whichever is earlier against existing provision of one year from date of commencement of Act. Not Notified
Amendment to Section 74 cosmetic only.
Section 76A - Reduction in penalty for non- payment to one crore or twice the amount of Deposit whichever lower from previous limit of one crore. Notified on February 09, 2018

18. Charges
Registration of charges (Sec 77): Charges as prescribed in consultation with RBI to be exempt from Registration.
Notified on May 07, 2018
Note – No notification appears to have been issued by RBI on the above
Recording of Satisfaction (Sec 82): Registrar upon receipt of application from company or charge holder to record satisfaction within 300 days from date of satisfaction.Now-30 days from Satisfaction date.
Not Notified

19. Provisions relating to declaration of Beneficial Interest - Substituted(Sec 90)(Notified -June 13, 2018)
Present Provision- Empowers Central Govt.to investigate into beneficial ownership of shares through appointing competent persons.
New provision- Any person holding either alone or through others or Trusts and through persons resident outside India beneficial interest over 25% or more in the shares of a company or the right to exercise significant influence or control over the company as per Section 2(27) shall be “significant beneficial owner”.
Such person to make declaration to the company of his beneficial interest.
Power to Central Govt. to exempt certain classes of persons from making declarations.

20. Provisions relating to declaration of Beneficial Interest (Sec 90)…contd
Obligations of Company
If Company believes that any person is a significant beneficial owner- can send notice to the concerned person seeking the required information.
Also empowered to apply to Tribunal for restriction as to transferability, suspension of all rights thereto.
To file Return of significant beneficial owners and changes therein with ROC.

21. Annual Return: Section 92
Details of indebtedness – Need not to be stated.
Details of shares held by FIIs not to be stated in AR.
Provision of Abridged Form for small Companies, OPCs.
Extract of Annual Return (MGT-9) not to be part of Directors’ Report.
Return only to be uploaded on Company’s website and link to be provided in Directors’ Report.
Not Notified except for deletion of provisions relating to delayed filing through payment of additional fees u/s 403.

22. Return of Promoters’ stake Changes - Section 93
Requirement for listed companies to file the details of promoters’ and top ten shareholders stake (MGT-10) – Reporting 2% Movement in number of shares held being withdrawn.
Notified on June 13, 2018

23. Section 96 – Relaxation of venue of AGM for unlisted cos.
Section now allows an unlisted company to hold its AGM anywhere in India, provided consent thereto is given by all the members in writing in advance.
Critique: As listed company under Section 2(52) refers to a company which has any of its securities listed, the above relaxation should have covered only a company whose equity is listed.
Notified on June 13, 2018

24. Relaxation regarding holding EGM
Section 100-Insert of Proviso to state that EGM of a Company other than 100% subsidiary of overseas Holding company can hold EGM anywhere in India. Hence EGM of Indian Company cannot be held outside India.
Explanation to Rule 17(2) of the Mgt & Admin Rules states that the requisitionists can convene their meeting at the place of registered office. Hence inference that EGM can be held at any location in India.
Amendment in line with Para of SS2 which allows such facility.
Act does not explicitly allow EGM at any location in India.
Notified on February 09, 2018

25. Section 110-Postal Ballot
Flexibility to allow items previously to be transacted only by postal ballot to be transacted at General Meeting subject to provision of e-voting facility and at the venue of meeting.
Implications: Amendment to Rule 22(16) of the Mgt. & Admin Rules which lists out items to be transacted through Postal Ballot only will be necessary.
Notified on February 09, 2018

26. Scope for interim dividend-Section 123
Subsection(3) allows declaration from close of year till date of AGM. Such dividend can be declared either out of the surplus in the P/L A/c OR out of profits for FY for which interim dividend is declared OR out of profits in the current FY earned till the quarter preceding the declaration.
Notified on February 09, 2018

27. Consolidation of Associates’ Accounts – Section 129(3)
Section 129(3)- to consolidate accounts of associate company into the financial statements of the Company.
Consolidated Financial Statements inclusive of those of Associates to be approved at AGM.
Existing Provision-Subsidiary includes Associate and JV.
Critique: The above amendment may not appear necessary at all as Existing explanation under Section 129(3) clarifies that subsidiary shall include associate and joint venture. This explanation has not been deleted.
Notified on May 07, 2018

28. Financial Statement, Board’s Report - Section 134
CEO can authenticate Accounts even if he is not a Director on the Board.
No need to prepare extract of Annual Return (MGT- 9) as part of Board’s Report.
Board Evaluation can be done by External agency. More Transparent Reporting.
Any Disclosure already made in Financial Statement need not be repeated in Board’s report. Policies regarding CSR, appointment and remuneration of Directors, to be provided only in website. Only salient features to be provided in the report.
Details of website to be provided in the report.
Form of Abridged Board’s Report to be prescribed by Central Government for OPC and Small company.
Not Notified

29. Corporate Social Responsibility
Section 135(1) CSR- “Any financial year” substituted by “immediately preceding financial year”-Notification dated clarifies “any financial year ” to mean three preceding years negated.
CSR Committee not to have ID where none required.
Explanation on “Net Profit” not to include items prescribed and to be computed as per Section 198.
Not Notified

30. Section 136-Servicing of Annual Report
Exception being carved out to Requirement of 21 days clear notice for dispatch of Annual Report with notice by which the above notice period will be relaxed if members holding 95% or more of paid up capital assent to this.
In case of companies with no capital consent for above to be provided by 95% of voting power.
Every listed company having subsidiaries to place on website subsidiary Accounts and provide physical copy if sought.
For foreign subsidiary of listed company if as per overseas law subsidiary accounts can be consolidated suffice if consolidated results put on web site. If subsidiary not subject to audit hosting unaudited results adequate.

31. Appointment of Auditors-Section 139-no ratification
No need to get the appointment of the Auditors ratified at every Annual General Meeting.
Notified on May 07, 2018
Auditor not to extend prohibited services under Section 144 directly or indirectly to the company or holding company or subsidiary .

32. Changes relating to Directors- Section 149
To replace requirement of Director to stay in India -182 days in calendar year to financial year.
In case of newly incorporated company requirement will apply proportionately. Needs to be clarified further.
concept “pecuniary relationship”-Eased for IDs Threshold set at transaction value not exceeding 10% of his total income.
Establishment of pecuniary relationship through relatives – norms being revised subject to prescription under Rules.
Notified on May 07, 2018

33. Relaxation relating to DIN-Section 152
Facility to appoint director even if he does not have DIN and he has an Identification Number similar to DIN to be prescribed under Section 153.
Not Notified

34. No Financial Deposit for Appointment of Independent Director – Section 160
Provision of cash deposit not to apply for regularization of appointment of Independent director or director recommended by Nomination and Remuneration Committee.
Where NRC not required, if appointment recommended by Board, no cash deposit.
Incase appointment is not recommended either by Board or NRC, requirement of deposit will continue.
Notified on February 09, 2018

35. Provisions relating to Alternate Directors-Section 161
Earlier position-One person cannot alternate for more than one director.
Law amended to clarify that director cannot be alternate for any other.
Notified: February 09, 2018

36. Directors - appointment, disqualification and directorships
Drafting Anomaly in Section 161 for Private Company removed – Filling up up casual vacancy without seeking shareholders approval.
To be subsequently regularized by members in the immediate next general meeting. This Change runs contrary to position in law as regards appointments to fill casual vacancies.
Notified on February 09, 2018
Section 164 disqualification eased – if appointed in company which has not filed Accounts for three years or failed to pay dividend etc., disqualification not to be attracted for first six months after appointment.
Further, disqualification on moral turpitude, order disqualifying director or conviction for offence on RPT shal continue notwithstanding pendency of appeal.
Notified on May 07, 2018

37. Directors – disqualification, vacation, resignation
Section 165-Directorship in dormant company not to be considered for determining maximum directorships.
Notified on February 09, 2018
Section If disqualified in Section 164(2)vacation to apply for all companies except company in which default has occurred.
Vacation clauses – Section 167(1)(e) and (f) to be suspended till conviction - Alignment with Section 164.
Section Need for director to file resignation with ROC being made optional by replacing “shall” by “may”.
Notified on May 07, 2018

38. Change in Board Meeting Process-Section 173
Section 173- If quorum physically is available at Board Meeting ,directors present at meeting through VC can participate even for negative list items
Audit Committee- Section 177-Applicability only to listed public Company.
RPT can be ratified by Committee if transaction value less than one Crore and transaction is with Director or officer of company.
If ratification not obtained within 3 months, transaction voidable by Committee and if authorized by director, he shall indemnify company
Notified on May 07, 2018

39. Relaxation of limits on exercise of borrowing powers-Section 180(1)( c )
Borrowing Capacity up – Securities Premium Account to be included in the borrowing limits of the company under section 180(1)(c).
Restoration of Status quo Ante in Section 293(1)(d).
Notified on February 09, 2018

40. Loans to Directors – Sec 185
Notified on May 07, 2018
Existing Prohibitory Provisions being replaced
Existing Restriction on loan directly or indirectly /extension of guarantee, security for loan taken by director or person who is director of holding company or partner or relative of director will continue.
No loan to firm in which director or relative of Director is partner.

41. Loans to Directors – Sec 185…contd.
Relaxations:
Company can provide loan/guarantee for loan taken by any person in whom Director of company is interested subject to :
a) Passing special resolution for loan.
Explanatory statement to give full particulars of loan/guarantee, purpose for utilization.
b) Loan to be used by borrowing company for principal business activities.

42. Loans to Directors – Sec 185…contd.
Definition “Any person in whom any of the Directors is interested”
a) Any Private Company in which such director is director or member.
b) Any Body Corporate in which 25% of total voting power is exercised by director or two or more directors together.
c) Any Body Corporate, Board, MD/Manager of which is accustomed to act as per lending Company/ its Directors

43. Loans to Directors – Sec 185…contd
Exceptions to new Section 185:
a) Not to apply for loan to MD/WTD as part of terms of service for all employees or as per scheme approved by members by special resolution.
b) loan/guarantee provided in company’s ordinary course of business. Interest Rate not to be below rate for Government Securities for specific periods.
c) Loan given by holding company to WOS or guarantee for loan of WOS.
d) Guarantee or security provided by holding company to bank/institution against loan to subsidiary.
Loan to be used for principal business of subsidiary.

44. Loan and Investment by the Company - Sec 186
No compliance required for loan given to employees – Existing drafting anomaly removed.
Special Resolution not required if loan/guarantee or investment is to wholly owned subsidiary or to JV Company.
Exemption under sub-section(11) shall apply for investments made by Banking company or Insurance company or housing finance company or company engaged in financing of enterprises and providing infrastructure companies .
Notified on May 07, 2018

45. Related Party Transactions-Section 188 Section 194 and 195 omitted
Second Proviso under Sec 188(1)being eased to allow voting where 90% or more in number are relatives of promoters or related parties
Section 194 and 195 relating to prohibition in forward dealing in securities and insider trading - withdrawn.
Notified on February 09, 2018.

46. Section 196: Appointment of Director, WTD or Manager.
Section 196(4) – central government approval required only for appointment of MD/WTD/Manager if person does not satisfy requirements of Part -1 of Schedule V
Not Notified

47. No Central Govt. nod for payment of managerial remuneration in excess of limits-Sec 197
Payment of managerial remuneration in excess of 11% of net profit will not require Central Govt. approval. Members’ approval by special resolution shall suffice.
Reference to CEO under Section 197 inappropriate.
Not yet Notified

48. Compounding of offences-Section 441
Offences punishable with fine alone could qualify previously for compounding.
Amendment to allow offences which are punishable with fine or imprisonment and fine to be compounded.
Notified on February 09, 2018

49. Conclusion
Amendments will – a) Ease the Procedural requirements substantially b) Avoid unnecessary duplication in processes c) Anomalies of existing Act removed leading to greater clarity. d) Pace of Notifications however very slow. Reading of the law rendered tedious.

50. Thank You