CLAUSE-BY-CLAUSE CONSIDERATION OF THE COMPANIES (AMENDMENT)
BILL, 2017
The Companies (Amendment) Bill, 2016 has been passed by the Lok Sabha
on July 27, 2017 as Companies (Amendment) Bill, 2017 & would be referred to
Rajya Sabha for consideration and passing.
There are 54,
total Amendment made in Companies (Amendment) Bill, 2017. Circulated 43 amendment proposals out of which five new clauses
also have to be incorporated – Clauses 47A, 73A, 75A, 78A and a New Provision Clause 88. Out of these
43 amendments, five new clauses have to be incorporated. This Bill had been referred to the Standing Committee. The Standing Committee had a detailed scrutiny of almost all the
provisions. But, unfortunately, these five
clauses have not been scrutinized
by the Parliamentary Standing Committee.
“The report of the Standing Committees shall
have persuasive value and shall be treated as considered advice given by
the Committees.”
In this case, the Standing
Committee had a detailed scrutiny
and the Company Law Committee has given the recommendations. All these five
amendments come out of all these things. It is not proper – Rule 80 (i) by virtue of Rule 388 because the Standing
Committee has not considered these five
new clauses.
Companies Act, 2013 was really a revolutionary and
significant legislation which we had in the history of company laws. In the
present scenario, this kind of a legislation is having its relevance. We all
know that India is becoming an international destination of investment. It is
our duty to remove all the hardships and ambiguity in the way of implementing
various causes of the Companies Act.
Similarly, corporate governance is also coming in a big way
in India. We should give more attention and emphasis there also. As regards
amendment in the CSR, it was a progressive legislation which we had in the
Companies Act. We must concentrate and pay more attention there also. As far as this Bill is concerned, it made
the companies more accountable in relation to structuring, disclosure and
compliance requirements. In that way, it is the most welcome step.
The Companies Act, 2013 limits the number of intermediary
companies through which investment can be made. Similarly, it also limits the
number of layers of subsidiaries in a company to have this kind of an
investment. This amendment makes it mandatory that the technical
member must at least be at the level of an Additional Secretary. It is true
that this legislation is intending to address the difficulties faced by the
stakeholders and improve ease of doing business in our country.
In a way, these proposals are giving clarification and
removing ambiguity. This legislation is a most welcome step. There are two
points and need to be discussed in detail considering the timeframe.
Sr.
No.
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Particulars
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1.
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ROLE
OF INDEPENDENT DIRECTORS
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2.
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CORPORATE
SOCIAL RESPONSIBILITY
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ROLE OF INDEPENDENT
DIRECTORS
The first point is regarding the role of independent directors as per the Companies Act. It is also
a most welcome amendment. As per the Act, 2013, the role of independent director was well-explained. It was brought
with a very good intention. It helps
the companies to protect the interest of
minority shareholders and ensure
that the Board does not favour any
particular stakeholder. The role of the independent directors is very
relevant. It ensures clean governance
among the corporates. In that way,
it was a very important piece of
amendment in the Companies Act. There are certain essential qualifications for independent directors.
What are those
qualifications ?
·
He should not be a
promoter of the company.
·
He should not have
any kind of special interest in the economic affairs of the company.
·
He should not have
any kind of financial relationship with the company. None of his relatives has any kind of financial interest in the company.
·
He is having completely
independent nature of assignment as an independent director.
As far as this piece of legislation is concerned, whether
the independence of the independent directors is diluted or not. whether the
independence of the independent directors will be encroached upon through this
amendment. That is one thing.
CORPORATE SOCIAL
RESPONSIBILITY
At the end, CSR, by the introduction of CSR, India may,
perhaps, be a model to the entire world. CSR was a very progressive and revolutionary
measure which we had taken. Unfortunately, CSR policy was not implemented properly. Some industrial heads
are diluting it. In the proposed amendments, there is a provision for that. We are giving exemption to certain categories.
Any kind of dilution of CSR activities
should not be there. CSR should be adhered to properly.
“That the Bill further
to amend the Companies Act, 2013, be taken into consideration.”
CLAUSE-BY-CLAUSE
CONSIDERATION OF THE BILL
Clause 2
Amendments
made:
Page 2, after line 32, insert—
'(ixA) in
clause (72), in the proviso, in clause (A), after
the words "State Act", the words "other than this Act or the
previous company law" shall
be inserted;'.
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(3)
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Page 2, line 39, for "a
company", substitute "the company".
(4)
Page 2, after line 39, insert--
'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.'.
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(5)
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Page 3, for lines 3 to 7, substitute--
'(xii) in
clause (87), in sub-clause (ii), for the words ''total share capital", the
words "total voting power" shall be substituted.'.
(6)
There are
Amendment Nos. 50 and 51 given.
omit
“the
arrangement have”.
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(50)
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“Page 2, line 11,--
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for
“in
consultation with”
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substitute
“with
the approval of.”
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(51)
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Amendment Nos. 50 and 51 to Clause 2, that is, ‘in
consultation with’ the Central Government, would like to have the amendment
with the approval of the Central Government in respect of instruments, which
are to be signed by the concerned people.
Amendment Nos. 50 and 51 to Clause 2,
“That clause 2, as amended, stand
part of the Bill.”
Clause
2, as amended, was added to the Bill.
Clause
3 was added to the Bill.
----
Clause 4
Amendment
made:
Page 3, for lines 22 to 46, substitute—
'4. In
section 4 of the principal Act, in sub-section (5), for clause (i), the
following shall be substituted, namely: -
"(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 twenty days from the date of approval or such
other period as may be prescribed:
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.".’. (7)
Amendment
Nos. 52 and 53 to Clause 4.
Query or clarification made
regarding the Object Clause in the
Memorandum of Association. This should be specific and lawful, so that, it added the term ‘lawful’ also.
“Page 3, line 28, --
after
“specific”
insert “lawful”.
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(52)
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for
“such other
period as may be prescribed”
substitute “forty - five days from the date of the
application.” (53)
Amendment Nos. 52 and 53 to Clause 4,
“That clause 4, as amended, stand
part of the Bill.”
Clause 4, as amended, was added to the Bill.
Clauses 5 and 6 were added to the Bill.
Clause 7
“Page 4, line 7, -
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for
“employee”
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substitute
“director”.
”
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(54)
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This is a
very important amendment to Section 26
of the Act, that is, an instrument
has to be attested by any employee.
Amendment is, instead
of employee, let it be the director of the company. It is a material
amendment that is to be incorporated.
Amendment
No.54 to clause 7.
“That
clause 7 stand part of the Bill.”
Clause 7 was added to the Bill.
Clause 8
Amendment
made:
Page 4, for line 18, substitute-
“(ii)
clauses (a), (b) and (d) shall be omitted.”. (8)
“That clause 8, as amended, stand
part of the Bill.”
Clause 8, as amended, was added to
the Bill.
Clauses 9 to16 were added to the
Bill.
Clause 17
Amendment
made:
Page 7, for lines 5 to 7, substitute-
`17. In section 76A of the principal Act,
-
(a)
in clause (a), for
the words, “one crore rupees”, the words “one crore rupees or twice the amount
of deposit accepted by the company, whichever is lower” shall be substituted;
(b) in clause (b), -
(i)
for the words,
“seven years or with fine”, the words “seven
years and with fine” shall be substituted;
(ii) the words “or with both”
shall be omitted.’.
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(9)
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“That clause 17, as amended, stand
part of the Bill.”
Clause 17, as amended, was added to the Bill.
Clauses 18 to 20 were added to the Bill.
Clause 21
Amendment
made:
Page 7, for lines 23 and 24,
substitute-
`21. In section 89 of the principal Act,
-
(i)
in sub-section (6), the words and figures, “within the time
specified under section 403”, shall be omitted;
(ii)
in sub-section (7), for
the words and figures, “under the first proviso to sub-section (1) of section
403”, the word “therein’, shall be substituted;
(iii) after
sub-section
(9), the following sub-section shall be
inserted, namely: -’. (10)
“That clause 21, as amended, stand
part of the Bill.”
Clause 21, as amended, was added to
the Bill. Clause 22 was
added to the Bill.
Clause 23
Amendments
made:
Page 9,
lines 9 and 10, for “One Person
Company and small company”, substitute
“One Person Company, small company and such other class or classes of companies
as may be prescribed.”.
(11)
Page 9, after line 14 insert-
(iii)
in sub-section (4), the words and figures, “within the time
as specified, under section 403”, shall be omitted;
(iv)
in sub-section (5), for
the words and figures, “under the section 403 with additional fees”, the word
“therein’, shall
be
substituted.’. (12)
“That clause 23, as amended, stand
part of the Bill.”
Clause 23, as amended, was added to the Bill.
Clauses 24 to 27 were added to the Bill.
Clause 28
Amendment
made:
Page 9,
lines 42 and 43, for “not less than ninty-five
per cent.”, substitute “majority in
number of members entitled to vote and
who
represent not less than ninety-five per cent.”. (13)
“That clause 28, as amended, stand
part of the Bill.”
Clause 28, as amended, was added to the Bill.
Clause 29 was added to the Bill.
Clause 30
Amendments
made:
Page 10, after line 11, insert –
‘(i) in sub-section (1), the words
and figures “within the time
specified under section 403” shall
be omitted;’.
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(14)
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Page 10, for line 12, substitute –
‘(ii) in sub-section (2), --
(a)
for the words
and figures “under section 403 with additional
fees”, the word “therein” shall be substituted;’.
(15)
Page 10, line 13 for “(a)”, substitute “(b)”.
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(16)
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Page
10, line 15 for “(b)”, substitute “(c)”.
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(17)
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Page 10, line 17 for
“(ii)”, substitute “(iii)”.
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(18)
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“That
clause 30, as amended, stand part of the Bill.”
Clause 30, as amended, was added to the Bill.
New Clause 30A
Amendment
made:
Page 10, after lines 25, insert-
Amendment
of section
121. ‘30A. In section 121 of the principal Act, -
(i)
in sub-section (2), the words and figures “within the time
specified, under section 403” shall be omitted;
(ii)
in sub-section (3), for the words and figures “under section
403 with additional fees”, the word “therein”
shall
be substituted.;’. (19)
“That new clause 30A be added to the Bill”.
New clause 30A was added to the Bill.
Clause 31
Amendment
made:
Page10, for lines 26 and 27, substitute-
'31. In section 123 of the principal Act,
-
(a) in sub-section (1), -
(i) in clause (a), -
(A)
for the words "both; or", the word
"both:" shall be substituted;
(B) the following proviso shall be
inserted, namely: -
"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";
(ii)
in the second proviso, for
the words "transferred by the company to the reserves", the words
"transferred by the company to the free reserves" shall be substituted;
(b) for sub-section (3), the following
sub-section shall be
substituted, namely:-'.
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(20)
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“That clause 31, as amended, stand part of the
Bill”.
Clause 31 as amended was added to the Bill.
Clause 32
Amendment
made:
Page 10, line 50, after “subsidiary or subsidiaries”, insert “and
associate
company or companies”. (21)
“That clause 32 stand part of the
Bill”.
Clause 32 as amended was added to the Bill.
Clause 33 was added to the Bill.
Clause 34
Amendment
made:
Page 11, for lines
15 to 17, substitute-'34. In section
132 of the principal Act,
(i)
in sub-section (4), in clause (c), in sub-clause (A), in
item
(II), for the words "ten lakh rupees", the words
"five lakh rupees" shall be substituted;
(ii)
in sub-section (5), for the words, brackets and figure
"the Appellate Authority constituted under sub-section (6) in such manner
as may be prescribed", the words "the Appellate Tribunal in such
manner and on payment of such fee as may be prescribed" shall be substituted;
(iii) sub-sections (6), (7), (8)
and (9) shall be omitted.'.
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(22)
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“That clause 34, as amended, stand
part of the Bill”.
Clause 34, as amended, was added to the Bill.
Clauses 35 and 36 were added to the Bill.
Clause 37
Amendment
made:
Page 12,
lines 25 and 26, for "agreed by
ninety-five per cent. of the members entitled to vote at the meeting", substitute-"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
ninety-five per cent of the total voting power exercisable at
the meeting.".
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(23)
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“That clause 37, as amended, stand
part of the Bill”.
Clause 37, as amended, was added to the Bill.
Clause 38
Amendments
made:
Page 13, for lines 6 and 7, substitute-
'38. in section 137 of the principal Act, -
(i) in sub-section (1), -
(a)
the words and figures "within the time specified under
section 403" shall be omitted;
(b)
in the second proviso, the words and figures "within
the time specified under section 403" shall be omitted;
(c)
after the fourth proviso, the following proviso shall be
inserted, namely: -. (24)
Page 13, line 12, omit “listed”.
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(25)
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Page 13, after line 15, insert-
'(ii) in
sub-section (2), the words and figures "within the time specified, under
section 403" shall be omitted;
(iii) in sub-section (3), for the
words and figures "in section 403", the
word "therein" shall be substituted.'.
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(26)
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“That clause 38, as amended, stand
part of the Bill”.
Clause 38, as amended, was added to the Bill.
Clauses 39 and 40 were added to the Bill.
Clause 41
Amendment
made:
Page 13, for lines 21 to 27, insert-
"41. In section 141 of the principal
Act, in sub-section (3), for clause
(i) the following clause shall be
substituted, namely: -". (27)
“That clause 41, as amended, stand
part of the Bill.”
Clause 41, as amended, was added to the Bill.
Clauses 42 to 47 were added to the Bill.
New Clause 47A
Amendment
made:
Page 15, after line 21, insert-
Amendment of
section 157
'47 A. In section 157 of the principal Act, -
(i)
in sub-section (1), the words and figures, "within the
time specified under section 403" shall be omitted;
(ii)
in sub-section (2), the words and figures, "before the
expiry of the period specified under section 403 with additional fee",
shall be omitted.'. (28)
“That new clause 47A be added to the
Bill.”
New clause 47A was added to the Bill.
Clause 48
Amendment
made:
Page
15, line 27, after "178", insert, "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.". (29)
“That clause 48, as amended, stand
part of the Bill.”
Clause 48, as amended, was added to the Bill.
Clauses 49 to 58 were added to the Bill.
Clause 59
Amendment
made:
Page 18, for lines 29 to 36, substitute-
"(4)
If any loan is advanced or a guarantee or security is given or
provided or utilised in contravention of the provisions of this section,
-
(i)
the company shall be punishable with fine which shall not be
less than five lakh rupees but which may extend to twenty-five lakh rupees;
(ii)
every officer of the company who is in default shall be
punishable with imprisonment for a term which may extend to six months or with
fine which shall not be less than five lakh rupees but which may extend to
twenty-five lakh rupees; and
(iii)
the director or the other person to whom any loan is
advanced or guarantee or security is given
or provided in connection with any loan taken by him or the other person, shall
be punishable with imprisonment which may extend to six months or with fine
which shall not be less than five lakh rupees but which may extend to
twenty-five lakh rupees, or with both.". (30)
“That clause 59, as amended, stand
part of the Bill.”
Clause 59, as amended, was added to the Bill.
Clause 60
Amendments
made:
Page 18, omit line 38. (31)
Page 19,
line 10, after "section", insert, ", except sub-section
(1),". (32)
“That clause 60, as amended, stand
part of the Bill.”
Clause 60, as amended, was added to the Bill.
Clauses 61 to 63 were added to the Bill.
Clause 64
Amendment
made:
Page 19, for lines 43 and 44, substitute—
‘64. In Section 196 of the principal Act,
-
(a)
in sub-section (3), in clause (a), after the proviso, the
following proviso shall be inserted, namely: -
“Provided
further that where no such special resolution is passed but votes cast in
favour of the motion exceed the votes, if any, cast against the motion and the
Central Government is satisfied, on an application made by the Board, that such
appointment is most beneficial to the company, the appointment of the person
who has attained the age of seventy years may be made.”;
(b)
in sub-section (4), for the words “specified in that
Schedule”, the words “specified in Part I of that
Schedule”
shall be substituted.’ (33)
“That Clause 64, as amended, stand part of the
Bill.”
Clause 64, as amended, was added to the Bill.
Clause 65
Amendments
made:
Page 20, for line 5 to 7, substitute-
“Provided also, that where the
company has defaulted in payment of dues to any bank or public financial
institution or non-convertible debenture holders or
any other secured creditor,”.
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(34)
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Page 20, line 18, for “of”, substitute “or”.
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(35)
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Page 20, for lines 25 to 27, substitute-
“Provided that where the company has
defaulted in payment of dues to any bank or public financial institution or
non-convertible debenture holders or
any
other secured creditor, the”. (36)
“That Clause 65, as amended, stand
part of the Bill.”
Clause 65, as amended, was added to the Bill.
Clause 66
Amendment
made:
Page 20, for line 47 to 49, substitute-
‘(i) in sub-section (3)-
(a)
in clause (a), after the words “sold by the company”, the
words and figures “unless the company is an investment company as referred to
in clause (a) of the Explanation to
section 186” shall be inserted:
(b)
after clause (e),
the following clause shall be inserted, namely: -
“(f) any amount representing
unrealised gains, notional
gains
or revaluation of assets.” (37)
“That Clause 66, as amended, stand part of the
Bill.”
Clause
66, as amended, was added to the Bill.
Clauses
67 to 73 were added to the Bill.
New Clause 73A
Amendment
made:
Amendment
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‘73A. In
section 374 of the principal Act, after
clause
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of section
|
(d), the following proviso shall
be inserted, namely:-
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374
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“Provided that upon registration
as a company under
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this Part a limited liability
partnership incorporated
|
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under the Limited Liability Partnership
Act, 2008 shall
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be deemed to have been dissolved
under that Act
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without any further or deed.”.’.
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(38)
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“That new clause 73A
be added to the Bill.”
New clause 73A was
added to the Bill.
Clauses 74 and 75 were
added to the Bill.
New Clause 75A
Amendment
made:
Page 21, after line 41, insert-
Amendment
|
‘75A. In
section 391 of the principal Act, for
sub-
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of section
|
section (2),
the following sub-section
shall be
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391
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substituted, namely:-
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“(2)
Subject to the provisions of section 376, the
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provisions of
Chapter XX shall
apply mutatis
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mutandis for closure of the place of business of a
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foreign
company in India as if it were company
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incorporated
in India in case such foreign company
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has raised
monies through offer or issue of securities
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under this
Chapter which have not been repaid or
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redeemed.”.’.
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(39)
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“That new clause 75A
be added to the Bill.”
New clause 75A was added to the Bill.
Clause 76
Amendments
made:
(40)
(41)
|
“That clause 76, as amended, stand
part of the Bill.”
.
Clause 76, as amended, was added to the Bill.
Clauses 77 and 78 were added to the Bill.
New Clause 78A
Amendment
made:
Page 22, after line 51, insert –
Amendment ‘78A. In section 410 of the principal Act,
of section 410. for the words, “orders of the Tribunal”, the words,
“orders of the Tribunal or of the
National Financial Reporting Authority” shall be
substituted.’.
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(42)
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“That new clause 78A be added to the Bill.”
New
Clause 78A was added to the Bill.
Clauses
79 to 87 were added to the Bill.
New Clause 88
Amendment
made:
Page 24, after line 22, insert –
Amendment of
Section 458
“88. In section 458 of the principal
Act, in sub-section (1), the proviso shall be omitted.”.
(43)
“That new clause 88 be added to
the Bill.”
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New clause
88 was added to the Bill.
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Clause
1
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Amendment
made:
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Page 1, line 3, for “2016”, substitute “2017”.
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(2)
|
“That clause 1, as amended, stand
part of the Bill.”
Clause 1, as amended, was added to the Bill.
Enacting Formula
Amendment
made:
Page 1, line 1, for “Sixty-seventh”, substitute
“Sixty-eighth”.
(1)
“That the Enacting Formula, as amended, stand
part of the Bill.”
The Enacting Formula, as amended,
was added to the Bill. The Title
was added to the Bill. ----
“That the
Bill, as amended, be passed.”
DISCLAIMER : The details of this article have
been prepared on the basis of relevant provisions. This is written only for
knowledge sharing purpose and author does not have any responsibility.
Thanks & Regards,
CS Meetesh Shiroya
