amendment rules
Contents
Recently Ministry of Corporate Affairs notified various Sections of Companies Amendment Act, 2017 to further amend Companies Act, 2013. This article provides an overview of the consequential amendment rules made in the corresponding Rules as follows:
To go through the Summary of Sections notified by MCA read: Summary of Sections Notified Under Companies Amendment Act 2017
Under the 2013 Act, Company could give loan/guarantee or provide any Security in connection with the loan to any person/other body corporate that exceeds 60 per cent of its paid-up share capital, free reserves and securities premium account or 100 per cent of its free reserves and securities premium account or 100 percents of its free reserves and securities premium account, whichever is more, only if a special resolution is passed.
The Amendment Act, 2017 clarifies that the companies cannot give loan/guarantee or provide any security to any person/other body corporate in excess of the specified limit. However, in a case where the aggregate of the loans or investment made, guarantee given or security provided together with the proposed loan/guarantee/security exceed the specified limit, a special resolution would be required to provide any investment/loan/guarantee or security.
Moreover, it is clarified that the company is allowed to give a loan to its employees in excess of the specified limits without passing a special resolution. Similarly, the requirement of Special Resolution would not be applicable in cases where a loan, guarantee, or security is provided to the company’s wholly owned subsidiary or a joint venture, or the company acquires the securities of its wholly-owned subsidiaries.
Official Notification by Ministry of Corporate Governance – G.S.R. 429 (E)
In this relation the Companies (Meetings of Board and its Powers) Rules, 2014 is amended to provide that the special resolution should specify the total amount up to which the Board of Directors are authorized to provide such loans or guarantee, security or acquire shares of other Companies.
It is noteworthy that definition of an investment company has been modified to provide that a company would be deemed to be principally engaged in the business of acquisition of shares, debentures or other securities if its:
Official Notification by Ministry of Corporate Governance – G.S.R. 432 (E)
Currently, under the 2013 Act, Companies are required to appoint their auditors for a period of five years which is subject to annual ratification by the shareholders at the annual general meeting.
The Amendment Act, 2017 has removed this requirement of annual ratification once the auditors have been appointed for five years. The provision with respect to the annual ratification has been removed from Companies (Audit and Auditors) Rules 2014 as well.
Official Notification by Ministry of Corporate Governance- G.S.R. 430 (E)
The Amendment Act, 2017 empowers SEBI to prescribe the contents of a prospectus. Accordingly, a public company is not required to provide certain details in the prospectus such as names and addresses of its registered office, dates of the opening and closing of the issue, its capital structure, and auditor’s report on the company’s profits/losses and liabilities. Therefore, these clauses have been omitted through the Amendment Act, 2017.
Similar provisions have been removed from the Companies (prospectus and Allotment of Securities) Rules, 2014.
Official Notification by Ministry of Corporate Governance- G.S.R. 431 (E)
None of the relatives of an independent director, for the purposes of sub-clauses (ii) and (iii) of clause (d) of sub-section (6) of section 149:
(i) is indebted to the company, its holding, subsidiary or associate company or their promoters, or directors; or
(ii) has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, its holding, subsidiary or associate company or their promoters, or directors of such holding company, for an amount of fifty lakhs rupees, at any time during the two immediately preceding financial years or during the current financial year.
The Amendment Act 2017 makes the filling of resignation by Director in Form DIR-11 to RoC, within 30 days as optional.
Official Notification by Ministry of Corporate Governance- G.S.R. 434 (E)
The rule is amended to provide that the share certificates are required to be signed by two directors (any two directors of the company) or a director (any director of the company) and a company secretary, where appointed.
Official Notification by Ministry of Corporate Governance- G.S.R. 435 (E)
The Amendment Provided that Registrar shall allow fifteen days’ time for re-submission in case of reservation of a name through web service – RUN for rectifications of defects if any.
Further Amendments are bought under Section 403 of the Companies Act, with prescribed additional fees for sub-item B and D.
Official Notification by Ministry of Corporate Governance- G.S.R. 433 (E)
Definitions of the following terms are explained in the Amended version:
Official Notification by Ministry of Corporate Governance- G.S.R. 429 (E)
Ministry of Corporate Affairs amended the Companies (Meetings of Board and its Powers) Rules, 2014 to provide that the Special Resolution should specify the total amount up to which the Board of Directors are authorized to provide such loan on a guarantee, security or acquire shares of other companies.
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