Companies Act 2013 Current Affairs - 2019
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The Lok Sabha has passed the Companies (Amendment) Bill, 2018. The bill aims to amend the Companies Act, 2013. The bill would replace the ordinance promulgated on November 2018.
Features of the Companies (Amendment) Bill, 2018
The features of the bill are:
- It provides for re-categorisation of offences. The bill re-categorises 16 offences including the issuance of shares at a discount, and failure to file an annual return as a civil offence.
- The bill aims to remove the clause of imprisonment for officers for defaulting the rule which prohibits issuing shares at a discount, except in certain cases. Instead, the bill provides for a penalty equal to the amount raised by the issue of shares at a discount or five lakh rupees, whichever is lower.
- The Bill states that a company may not commence business, unless it files a declaration within 180 days of incorporation, confirming that every subscriber to the Memorandum of the company has paid the value of shares agreed to be taken by him, and files a verification of its registered office address with the Registrar of Companies within 30 days of incorporation.
- The Bill transfers the power to approve any changes in the financial year for a company associated with a foreign company and any alteration in the incorporation document of a public company which has the effect of converting it to a private company to the central government from the National Company Law Tribunal.
- The Bill provides that failure make a declaration of interest when a person holds the beneficial interest of at least 25% shares in a company or exercises significant influence or control over the company may either be fined or imprisoned for up to one year or both.
- The bill increases the ceiling up to which the regional director can compound (settle) offences with a penalty of up to twenty-five lakhs from five lakh rupees.
The amendments are brought in as per the recommendations of a committee constituted to suggest changes to the Companies Act, 2013.
The Parliament has passed Companies (Amendment) Bill, 2017 to strengthen corporate governance standards, initiate strict action against defaulting companies and help improve ease of doing business in the country,
The bill provides for more than 40 amendments to Companies Act, 2013. It will help in simplifying procedures, make compliance easy and take stringent action against defaulting companies.
Key Features of Bill
Group company structure and compliance procedures: The bill has changed definitions relating to ‘holding company’, ‘subsidiary company’, ‘associate company’. It will have impact on group company structure and compliance procedures.
Compliance procedures and approval mechanism: It enhances scope of compliance procedures and approval mechanism of Related Party Transaction of related parties.
Shares on private placement basis: It amends this provision in parent Act. It will have impact on both – private companies and public companies.
Maintenance of Register of significant beneficial owners in a company: The bill adds this new provision. Besides, changes provisions relating to board meetings and shareholders’ meetings, based on operational and compliance issues faced by the corporates.
Corporate Social Responsibility (CSR): The amendment to CSR provisions are particularly related to its applicability and constitution of CSR. It takes into account the interpretational and operational issues.
Resident Director and Independent Director: It provides for clarity in applicability and role of Resident Director and Independent Director. Further it elaborated ‘Pecuniary relationship’ in relation to independent directors.
Loans to Directors: The bill substitutes entire section relating to ‘Loans to Directors’ under the Companies Act, 2013. It introduces certain checks and balances by way of approval process and for enabling ‘loans to directors’, in certain cases.
Managerial Remuneration: It liberalises provision related to Managerial Remuneration. It replaces requirement of Central Government approval by requirement of approval of shareholders, secured creditors and non-convertible debenture holders, as the case maybe.
Auditors Report: It mandates requirement that Statutory Auditor of company to report in its Auditors Report on compliance of provisions of managerial remuneration and whether remuneration paid to any director is in excess of prescribed limits.