Ease of doing business Current Affairs

Government notifies the Companies (Amendment) Act, 2017

The Ministry of Corporate Affairs has notified the Companies (Amendment) Act, 2017. The Amendment Act amended some provisions of Companies Act, 2013.

Few provisions in the Amendment Act have important bearing on the working of the Insolvency and Bankruptcy Code (IBC), 2016. They will come into force on date as Government notify in Official Gazette. It aims to help in simplifying procedures, make compliance easy and take stringent action against defaulting companies.

Key Facts

Issuance of shares at a discount: It was prohibited by Section 53 of the Act. The Amendment Act allows companies to issue shares at discount to its creditors when its debt is converted into shares in pursuance of any statutory resolution plan such as resolution plan under IBC or debt restructuring scheme.

Payment of managerial remuneration in excess: It was required for company in general meeting for payment of managerial remuneration in excess of 11% of net profits as per Section 197 of parent Act. The Amendment Act now requires company which has defaulted in payment of dues, prior approval of bank or public financial institution concerned or non-convertible debenture holders or other secured creditor. For such payment of managerial remuneration shall be obtained by company before obtaining approval in general meeting.

Prohibition of registered valuer from undertaking valuation of any assets: Section 247 of Companies Act, 2013 them of any assets in which they have direct or indirect interest or becomes so interested at any time during or after valuation of assets. The Amendment Act now prohibits registered valuer to be appointment as valuer or three years after valuation of assets was conducted by him.


Parliament passes The Companies Amendment Bill, 2017

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.