CORPORATE UPDATE FOR THE MONTH SECOND WEEK OF JULY

AMENDMENTS AT A GLANCE ON COMPANIES (AMENDMENT) ACT 2015

The proposed amendments deal with related party transactions, fraud reporting by auditors, public inspection of Board resolutions, responsibilities of audit committee, restrictions on bail, making common seal optional, the requirement for minimum paid-up share capital, the strength of benches for hearing winding up cases, the jurisdiction of special courts to try offences). This Act shall come into force on 26th May 2015

Sr. No.	SECTION	PREVIOUSLY	NOW
1	2(68)	Private Company required “Minimum Paid-up Share Capital of Rs 100,000/-“	No requirement of Minimum Paid Up Capital.
2	2(71)	Public Company required “Minimum Paid-up Share Capital of Rs 500,000/-“	No requirement of Minimum Paid Up Capital.
3	9, 12 and 223	Affixation of Common Seal is Mandatory.	Use of Common Seal is now optional. (Not Mandatory).
4	11	Commencement of Business.	No requirement of Commencement of Business Certificate. Such section shall be omitted.
5	22	Execution of Bills of Exchange.	Use of Common Seal is now optional. (Not Mandatory). If the company doesn’t have common seal the authorization under subsection (2) of Section 22 shall be made by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary.
6	46	Issue of Share Certificate(46(1): A share certificate issued under the common seal of Company (Clause substituted).	Use of Common Seal is now optional. (Not Mandatory) If a company doesn’t have a common seal then signed by two Directors or by a director and Company secretary (if any).
7	76A	This was not in the Act.	New Section 76A inserted after Section 76 for punishment for deposits accepted in violation of the provisions of the said Act.(Bare Act language of Section 76A given at the end).
8	117(3)(g)	The public can inspect the form MGT-14 filed by the Companies as per section 179(3) for the Board Resolution.	The public can’t inspect form MGT-14 filed for the purposes mentioned in section 179(3). MGT-14 (filed for the purpose of Section 179(3), Board Resolution) will not be available for public inspection on MCA portal.
9	123(1)	This was not in the Act.	After the third proviso of 123(1), the following proviso is inserted. Proviso: No company shall declare dividend unless carried over previous losses and depreciation not provided in the previous year or years are set off against profit of the company for the current year.
10	124(6)	“Unpaid or unclaimed dividend has been transferred under sub-section (5) Substituted.	(i) For the words, brackets and figure “unpaid or unclaimed dividend has been transferred under sub-section (5) shall also be”, the words “dividend has not been paid or claimed for seven consecutive years or more. (ii) After the proviso, the following Explanation shall be inserted, namely:—“Explanation.— In case any dividend is paid or claimed for any year during the said period of seven consecutive years, the share shall not be transferred to Investor Education and Protection Fund.
11	134(3)	Not Earlier in the Act.	After Clause “c” following clause (ca) is inserted: Details in respect of frauds reported by auditors under sub-section (12) of section 143 “other than those which are reportable to the Central Government”.
12	143(12)	The Act requires that if the auditor of a company has reason to believe that an offence of fraud has been committed against the company, by its employees, he must report the matter to the central government within a time period and in a manner prescribed	Notwithstanding anything contained in this section, if any auditor of a company in the course of the performance of his duties as auditor, has reason to believe that an offence of fraud involving such amount or amounts as may be prescribed, is being or has been committed in the company by its officers or employees, the auditor shall report the matter to the central government within such time and in such manner, as may be prescribed: Provided that in case of a fraud involving lesser than the specified amount, the auditor shall report the matter to the audit committee constituted under section 177 or to the Board in other cases within such time and in such manner, as may be prescribed: Provided further that the companies whose auditors have reported frauds under subsection 12 to the Audit Committee or the Board but not reported to the Central Government, shall disclose details about such frauds in the Board Report in such manner as may be prescribed.
13	117(4)(iv)	Every Audit Committee shall act in accordance with the terms of reference specified in writing by the Board which shall inter alia include (iv) approval or any subsequent modification of transaction of the Company with Related Party.	After 117(4)(iv) following proviso added: Provided that the Audit Committee may make omnibus approval for related party transaction proposed to be entered into by the company subject to such conditions as may be prescribed”.
14	185	Not Earlier in the Act. Bare Act Language of Section 185(1)(b): A company which in the ordinary course of its business provides loans or gives guarantees or securities for the due repayment of any loan and in respect of such loan interest in charged at a rate not less than the bank rate declared by the RBI.	After clause (b) Sub Section (1) of Section 185 following clause and proviso added:- (c) Any loan made by a Holding Company to its Wholly own Subsidiary Company or any guarantee given or security provided by a Holding Company in respect of any loan made to its wholly own subsidiary Company, (d) Any guarantee is given or security provided by a Holding Company in respect of Loan made by any Bank or FINANCIAL institution to its subsidiary CompanyProvided that the loan made under clauses (c) and (d) are utilized by the subsidiary company for its principal business activity.
15	188(1)	Earlier Special Resolution was required. (As per the previous system, the companies with a paid up capital of Rs 10 crore or more were required to get shareholders’ nod through a special resolution in case of related party transactions).	For the word “Special Resolution” the word “Resolution” is substituted under the Act. Now Ordinary resolution will work.
16	188(1)	Not Earlier in the Act.	Not required to follow the provision of Section 188. After the third proviso of Section 188(1) the following proviso inserted: Provided also that the requirement of passing the resolution under the first proviso shall not be applicable for transactions entered between a holding company and its wholly-owned subsidiary whose accounts are consolidated with such holding company and have been placed before the shareholders for their approval.
17	212(6)	An investigation into affairs of Company by Serious Fraud Investigation office. Here provided Bail restriction for many sections.	The bail restrictions to apply only for an offence relating to fraud u/s 447
18	419(4)	In Section 419(4) winding up was mentioned.	The word WINDING UP shall be omitted.
19	435	Establishment of Special Courts Establishment of Special Courts. The Central Govt. may for the purpose of providing speedy (Trial of offences under this Act), established or designate as many Special Courts as may be necessary.	For the Words “Trial of Offences under This Act”, The words “Trial of offences punishable under this Act with imprisonment with 2 years or more” is substituted. After Sub Clause (1) the following proviso is inserted:“Provided that all other offences shall be tried, as the case may be by a Metropolitan Magistrate or a Judicial Magistrate of the first class having jurisdiction to try any offence under this Act or under any previous Company Law.
20	436	Offence exercised by special courts Section 436(1)(a)	For the words “all offences under this Act”, the words, brackets and figures “all offences specified under sub-section (1) of section 435″ shall be substituted Section 435(1) given below.
21	462	Subsection (2,3 and 4 of Section 462) shall be substituted.	Substituted language of Section 462(2),(3) and (4) given below.

“76A. Punishment for contravention of section 73 or section 76:-

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 matter 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,:-

The company shall, in addition to the payment of the amount t of deposit or part thereof and the interest due, be punishable with fine which shall not be less than one crore rupees but which may extend to ten crore rupees; and

Every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees, or with both.

Provided that if it is proved that the officer of the company who is in default, has contravened such provisions knowingly or willfully 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.”

“435 (1).Establishment of Special Courts:-

The Central Govt. may for the purpose of providing speedy (Trial of offences punishable under this Act with imprisonment with 2 years or more” is substituted), established or designate as many Special Courts as may be necessary.

“Provided that all other offences shall be tried, as the case may be by a Metropolitan Magistrate or a Judicial Magistrate of the first class having jurisdiction to try any offence under this Act or under any previous Company Law.“

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462: Power to exempt class or classes of companies from provisions of this Act:-

A copy of every notification proposed to be issued under sub-section(1), shall be laid in draft before each House of Parliament, while it is in session, for a total period of 30 days, and if, both Houses agree in disapproving the issue of notification or both Houses agree in making any modification in the notification, the notification shall not be issued or, as the case may be, shall be issued only in such modified form as may be agreed upon by both the Houses.

In reckoning any such period of 30 days as is referred to in sub-section (2), no account shall be taken of any period during which the House referred to in sub-section(2) is prorogued or adjourned for more than for consecutive days.

The copies of every notification issued under this section shall, as soon as may be after it has been issued, be laid before each House of Parliament.

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