The 2018 Amendment to The Companies Act, 2013
The amendment is effective from 7th May 2018.
- Changes in section 2 (Definition) under Companies amendment Act
- Associate Company (S. 2(6)): “significant influence” shall now be mean control of at least 20 percent of the Total voting powers (earlier it was total share capital) or control of or participation in business decisions under an agreement. Joint Venture: Earlier joint venture was not defined. Now Joint venture is defined as a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement;
- Subsidiary Company (S. 2(87)): the exercise or control of more than one-half of the total voting power (earlier share capital).
- Insertion of Section 3 in Companies amendment Act –A: If at any time the number of members in a company is reduced below the requisite level (7 for a public company and 2 for private company) and the company carries on business for more than six months, then after six months, each member shall be severally liable for the whole debt of the company contracted during that time.
- Section 12 (Registered office of the Company) in Companies amendment Act: Earlier the time limit to have a registered office was before the fifteenth day of its incorporation. Now the time limit is within thirty days of its incorporation.
- Prospectus (Section 26) in Companies amendment Act : SEBI in consultation with Central Government is empowered to prescribe the contents of the prospectus. Clause a, b, c is omitted (Name, Address of the registered office, opening and closing of the issues, capital structure and auditor’s report on profits/losses need not be provided)
- Private Placement (Section 42) under Companies amendment Act:
- A company can make a private placement of securities.
- PP can be made only to a selected group of people who have been identified by the board, and such person shall not be more than 50.
- Section 54 (Sweat Equity Shares) under Companies amendment Act: Now the companies are permitted to issue sweat equity shares within the period of one year from the commencement of business.
- Section 77 and Section 78 (registration of charges): The amendment does not require registration of such charges as may be prescribed in consultation with the RBI.
- Section 90 (Significant Beneficial owner of the company): the person who is significant beneficial owner has to give a declaration to the company. The person alone or together, or through person or persons have a beneficial interest of not less than 25 % shall be considered of having a beneficial interest in the company. This provision will be applicable to all the companies and the company has to register them as significant beneficial owner.
- Section 92 (Annual Returns) under Companies amendment Act: The central Government is now empowered to prescribe a form of Annual Return. It is now mandatory for the company to provide for the entire annual report on the website of the company. Section 93 omitted so now the registrar need not be informed when the stake of promoter’s change.
- Section 96 (Annual General Meeting): For unlisted Companies, the Annual General Meeting can be held anywhere in India with the consent of all members either in written or electronic mode in advance.
- Section 100 (EGM): The wholly owned subsidiary of a company incorporated outside India has been allowed to hold its extraordinary general meeting outside India. Such Companies or subsidiaries can hold EGM at any place where they want in the world.
- Section 101: Now a meeting can be commenced with a shorter notice period if 95% of voting power consents to such notice.
- Section 123 (Declaration of Dividend): The BoD may declare interim dividend during any financial year at any time during the period from closure of financial year till holding of any of annual general meeting out from surplus in profit & loss account or else out from profits of fiscal or the financial year for which such dividend (interim) is required to be stated or out from the profits generated in such financial year until quarter prior the date of declaration of the dividend.
Final Dividend: Any time through the period from closing of financial year till the holding of next annual general meeting out from surplus in profit & loss account or out from profits of fiscal or financial year for which such dividend is required to be stated or out from profits made in such said financial year until the quarter prior the date of declaration of the dividend.
- Section 129 (Financial Statement): The consolidated financial statement of the company, its subsidiaries and associates should be in accordance with the applicable accounting standards and be laid before the Annual General Meeting.
- Section 130 (Re-opening of books of Accounts): Re-opening of books of accounts is limited to 8 financial years immediately preceding the current financial year. The order for reopening of accounts can be made up to eight years unless there is a specific direction under section 128(5) from the Central Government for a longer period.
- Section 136 (Audited Financial Statement): Amendment to sub-section (1) of section 136 provides that the copies of audited financial statements and other documents may be sent even with a shorter notice period if the same is agreed upon by ninety-five percent of the members entitled to cast their votes.
- Section 139 (Appointment of Auditors): An auditor appointed for a period of five years need not be ratified every year at the AGM. Non-Compliance of the auditor to the terms the fine is either 50,000 or the amount received by the auditor whichever is lower. (Section 140). Contravention to the provision of 139 by the company, is 25,000 and may increase to 5 lakh Rupees or four times the remuneration of an auditor, whichever is lower.
- Section 149 (Board of Directors): For resident Director, the director needs to stay in the country for 182 days in the previous financial year (Earlier previous calendar year).
Independent Director: the pecuniary relationship is now substituted “pecuniary relationship, other than remuneration as such director or having transaction not exceeding ten percent of the persons’ total income in all or such sum as to be agreed upon,” shall be thus substituted;
- Section 160 (Retiring directors and directorship) under Companies amendment Act : The necessity to deposit a number of rupees one (1) Lakh w.r.t. recommendation or nomination of the directors shall not be pertinent in the situation where the case is of appointing an independent director/directors or the directors that are nominated through the nomination and remuneration committee.
- Section 164 (Disqualification of a director): In case the Company has defaulted on the grounds of non-filing of the financial statement or failure to repay the interest after the due dates, then the director newly appointed shall not incur any liability for a period of six months from the date of appointment.
Disqualified on the ground of conviction: If a person is disqualified for a conviction for any offense, even if an appeal is preferred against the order of conviction, it shall still serve as a ground for conviction.
- Section 167 (vacation of Director): If a director is disqualified for not filing the financial Statements or failure in repayment of dues, the office of the director shall become vacant in all the companies, other than the company which is in default under that sub-section.
Vacation need not be carried out: If conviction is for less than 30 days or where an appeal or petition is preferred within thirty days as aforesaid against the conviction resulting in sentence or order, only until the expiration of the period of seven (7) days since the date when any such petition or appeal has been disposed of; or elsewhere any similar further petition or appeal is chosen in opposition to the sentence or order within a period of seven (7) days, awaiting such additional further appeal or petition is disposed of.”.
- Section 168 (Resignation of Director): Earlier it was mandatory for the resigning director to file a form with a detailed reason of resignation within 30 days. Now, this provision is made optional.