GIST OF CHANGES AS PER THE COMPANIES AMENDMENT ACT, 2017

GIST OF CHANGES AS PER THE COMPANIES AMENDMENT ACT, 2017

DIRECTORS

1.    Every Company shall have at least one director who stays in India for a total period of not less than 182 days during the Financial Year. (Earlier – Calendar year).

For newly incorporated company, for the 1^st Financial year this requirement shall apply proportionately during the 1^st year. [Section 149]

2.    DIN – Central Government can prescribe any identification number which shall be treated as DIN.

3.    Requirement of deposit of Rs. 1 Lakh along for proposing appointment of Director at General Meeting u/s 160 shall not be applicable in respect of appointment of an Independent Director or director recommended by the Nomination and Remuneration Committee (NRC) or director recommended by the Board, if NRC is not there. [Section 160]

4.    Alternate Director – The director cannot be appointed as Alternate director for another director. (earlier only alternate director was not allowed to be alternate director for another director). [Section 161(2)]

5.    Disqualification for appointment of director [Section 164 (2)]

•  If person is appointed as Director of the Company who has defaulted in filing financial statement or annual return for any continuous period of three FY or has failed to repay deposit, interest / debentures/ dividend declared etc. he need to ratify the defect within period of 6 months of his appointment, else he will also disqualified under Section 164(2).

• Once order is passed against director under Section 164(1) (d) – moral turpitude, (e) – disqualifying him for appointment as director, (g) – convicted of offence for Related party in last 5 years, he is not eligible for appointment as director of company irrespective that appeal against such order is pending.  (earlier – during appeal period he can appointed as Director).

6.    Vacation of office of Director [Section 167(1)]

(a) The Company has defaulted in disqualification under Section 164(2) i.e. in filing financial statement or annual for any continuous period of three FY or has failed to repay deposit, interest / debentures/ dividend declared etc., the office of Director shall vacant in all the companies, other than the company which is in default.

(b) In case Director becomes disqualified by order of an court or the tribunal, his office is not vacated till the time appeal is pending. (earlier – on passing of order office become vacated)

7.  Filing of Form DIR-11 by Resigning Director has made optional (earlier – mandatory).

8.    Number of Directorship [Section 165] – for reckoning limit of directorship in 20 companies, directorship in dormant company excluded.

9.    Independent Director

• Criteria of appointment – scope of Pecuniary relationship elaborated – pecuniary relationships other than remuneration as such director or having transaction not exceeding ten per cent of his total income or such amount as may be prescribed. [Section 149 (6)(d)]. 

• Criteria of relative association with company substituted in detail - [Section 149 (6)(e)]

BOARD MEETING

10.Certain item of business which cannot be transacted at Board Meeting through video conferencing or other audio video means – omitted provided requisite quorum is physically present.

11.Restriction on Borrowing power of Board [Section 180(1)(c)] - Consent of Company through Special resolution is required to borrow money when aggregate borrowing exceeds the total of paid up capital + free reserves  + securities premium (addition). 

12.Disclosure of interest by Director [Section 184] – exemption for director/s holding upto 2% of share capital of company is also extended to director/s holding upto 2% of the body corporate.

13.Loan to Director [Section 185]

To provide Loan / give any guarantee or provide any security in connection with loan taken by:

Sr No.	Particulars	Change
(1).	Directors of the Company	No Change (Prohibited)
(2).	Directors of the Holding Company
(3).	Any partner of (1) and (2)
(4).	Any relative of (1) and (2)
(5).	Any firm in which 1, 2 and 4 is partner.
(6).	Private Company in which (1) is Director or member	Allowed subject to: (a) Special Resolution at General Meeting with detailed disclosure in Explanatory Statement. (b)          Loan will be utilised by borrowing entity for its principal business activities. (Earlier: Prohibited)
(7).	Body Corporate in which (1) singly or jointly holding 25% voting power at General Meeting
(8).	Body Corporate - Board, MD or manager of which is accustomed to act with the directions or instructions of the Board of Directors of the Company or any one from (1)

14.Section 194 (prohibition on forward dealings in securities of company by directors or KMP) and 195 (Prohibition on insider trading of securities) – omitted.

AUDIT COMMITTEE

15.Every Listed Public Company is required to constitute Audit Committee. (earlier listed company).

16.For related party transaction other than Section 188(1), if audit  committee does not approve the transaction, it will make its recommendation to the board.

17.If related party transaction of more than Rs. 1 crore is entered into by company without prior approval of the Audit Committee and not ratified by Audit committee within 3 months then transaction will be voidable at the option of the Audit Committee.

NOMINATION AND REMUNERATION COMMITTEE (NRC)

18.Every Listed Public Company is required to constitute NRC. (earlier listed company).

19.NRC shall specify manner for effective evaluation of performance of board, its committee and individual directors to be carried out by Board / NRC / independent external agency and review its implementation and compliance. (earlier NRC shall carry out evaluation of every director’s performance)

DIRECTOR’S REPORT

20.Director Report

(a) MGT-9 (Extract of Annual Return) – Omitted

(b) To mention web address, If any, where Annual Return has been placed.

(c) Disclosure under Section 134(3)(a) to (q) – if already mentioned in Financial Statement – only reference to Financial Statement to be made to avoid repetition. 

(d)Policy on (a) Director’s Appointment and remuneration under Section 178(1) and (b) CSR if available on company’s website, only silent features of policy and change therein in brief is required to mention alongwith web address at which full policy is available. 

(e) Formal annual evaluation of the performance of the Board, its Committees and of individual Directors – only indicate manner in which its made. (Earlier evaluation has to be made by Board – now only need to mention in which manner its done). 

(f)   OPC or Small Company: Central Government may prescribed for abridged director report.

ANNUAL RETURN (FORM MGT-7)

21.Annual Return 

(a) Details of Indebtedness – Omitted. 

(b)Details of Foreign Institutional Investors like names, addresses, countries of incorporation, registration and percentage of shareholding.  – omitted. 

(c) OPC / Small Company / prescribed Company: Central Government may prescribed for abridged Annual return. 

(d)To place copy of Annual Return on the Website of the Company and the web-link of such annual return shall be disclosed in the Board's report.

FINANCIAL STATEMENT (SECTION 134)

22.Signing of Financial Statement – CEO has to signed Financial Statements irrespective whether he is Director or not. (Earlier if he is director then only it was mandatory).

23.Only listed Company having subsidiary or subsidiaries shall place separate audited accounts in respect of each its subsidiary on its website. (Earlier every company was required to provide the same).

24.Listed Company having subsidiary incorporated out side India (Foreign Subsidiary): 

(a) If foreign subsidiary is statutorily required to prepare Consolidated Financial Statement, then only consolidated Financial statement of  Foreign Company can be place on website of listed company - no need to place accounts of the subsidiary of Foreign subsidiary on the website of the Listed Company. 

(b)When foreign subsidiary is not required to gets its accounts audited then unaudited accounts of the Foreign subsidiary shall be placed on website of listed company. Where such accounts are in language other than English then translated accounts are also required to be place on website of the Company.

CONSOLIDATION OF FINANCIAL STATEMENT [Section 129(3)]

25.“Associates” are specifically mentioned.(Earlier included in subsidiary via explanation)

26.Company is not required to consolidate its Joint Venture. (Earlier in explanation it was mentioned that – for the purpose of this section the word subsidiary shall include associate company and joint venture.)

REOPENING OF ACCOUNTS [SECTION 130]

27.Before passing order for reopening of accounts the Court / tribunal is also required to give notice to any other person concerned (like who has made application for reopening of accounts) and take into consideration representation, if any, made by them (earlier – only government authorities were allotted to make representations and others were not allowed).

28.Limited to 8 Financial Years immediately preceding the current FY. (earlier no such provision)

E-FORM FILING

29.In respect following forms, Condonation is triggered after expiry of time given in the relevant section. (earlier - additional cooling period of 270 days given under Section 403, where we can file forms with additional fees upto 300 days in total without condonation) 

(a) Form MGT-6: Declaration of Beneficial Interest. [Section 89 (6)] 

(b)Form MGT-7: Annual Return [Section 92] 

(c) Form MGT-14: Filing of Resolutions and agreements to the Registrar [Section 117] 
(d)Form AOC-4: Filing of Financial Statement [Section 136]
  
(e) Form DIR-3C: Intimation of DIN by the company to the Registrar. [Section 157] 

(f) Form MGT-15: Form for filing Report on Annual General Meeting by listed company [Section 121].

30.Banking Company is not required to file Form MGT-14 for board resolution passed under Section 179(3)(f) – to grant loans or give guarantee or provide security.

31.Form MGT-10 [Section 93]  Listed Company to file Form MGT-10 with respect to change in number of shares held by Promoters or Top 10 shareholders of the Company. – Omitted.

32.Advance Filing of Special Resolution u/s 94 with RoC for keeping register of members and copies of Annual Return at any other place in India other than Registered office – Omitted.

PRIVATE PLACEMENT 

(a) Form PAS-3: Return of Allotment to be filed in 15 days from the date of Allotment, (Earlier 30 days from the date of allotment).

(b) The Company cannot utilised the monies raised through private placement unless allotment is made and Form PAS-3 is filed with RoC.

(c)If a company default in filing Form PAS-3 within 30 days then, the company, its promoters, and directors shall be liable to penalty of Rs.1000/- per day during which such default continues not exceeding Rs. 25 lakhs.

(d) Filing of Form GNL -1 along with PAS 4 and PAS 5 – omitted.

GENERAL MEETING

33. AGM of the unlisted company can be held at any place in India if consent is given in writing or by electronic mode by all the members in advance. [section 96].

34.Ratification of Appointment of Auditor at every Annual General Meeting – omitted.

35.Extra Ordinary General Meeting can be held at any place in India.

36. Wholly owned subsidiary of Company incorporated outside India can held Extra Ordinary Meeting outside India. [Section 100]

37. Extra ordinary GM can be held at Shorter notice provided consent obtain from majority in numbers of members entitled to vote and who represent not less than 95% of paid up capital as gives right to vote at meeting. (earlier only 95 % members entitled to vote). [Section 101]

38. Copies of Audited Financial Statement and other documents can sent to member at Shorter Notice if majority of members entitled to vote and who represent not less than 95% of paid up capital as gives right to vote at meeting (earlier MCA Circular – only provides for 95% of voting rights). [Section 136]

39.Any Business item which requires approval through postal ballot can be transacted at General Meeting provided that e-voting facility made available to the members. (Section 110).

AUDITORS

40.If auditor fails to file form ADT-3 intimating about his resignation within 30 days of from the date of resignation, then he shall be punishable with fine which shall not be less than Rs. 50,000/- or the remuneration of Auditor (addition) [Section 140].

41.Disqualification of Auditor: Auditor who renders any services under Section 144 to the Company, its holding company or its subsidiary companies (Addition).  [Section 141(3)(i)].

42.Auditor have a right to access to the records of the of all its subsidiaries and associates which are going to be consolidated. (Addition) [Section 143]

43.Auditor’s report to state: 

(a) Whether the company has adequate internal financial control with reference to financial systems and operating effectiveness of such controls. (Addition) [Section 143(3)(i)]. 

(b)Whether the remuneration paid by the company to its directors is in accordance with provision of Section 197, whether remuneration paid to any director is in excess of the limit laid down under Section 197 and give such other details as may be prescribed. [Section 197(16)].

INCORPORATION

44.Form INC-1 - Name Availability–  on Incorporation, Allotted name will be reserved for 20 days (earlier 60 days.)

45.Form INC-9 from subscriber can be in form of Declaration (earlier Affidavit).

REGISTERED OFFICE

46.Form INC-22 (Notice of situation or change of situation of registered office) – to be filed within 30 days (earlier 15 days) from event date.

CORPORATE SOCIAL RESPONSIBILITY:

47.Corporate Social Responsibility: 

(a) Applicability: Applicable when Company is having threshold limit of Net worth, Turnover, Net Profit during the immediately  preceding Financial Year. (earlier – CSR was become applicable from the year in which it reaches the threshold limit). 

(b) CSR Committee – Minimum No. of Member – If Independent Director is there 3 otherwise 2. 

(c) CSR Policy to indicate the activities to be undertaken by the Company in areas or subject specified in Schedule VII. (Earlier - CSR Policy to indicate the activities to be undertaken by the Company as specified in Schedule VII) – more clarity. 

(d)Net profit shall not include such sums as may be prescribed, and shall be calculated in accordance with the provisions of section 198. (Earlier – Average Net Profit – no authority to government to prescribe the sum that can be excluded from calculation of Net Profit)

APPOINTMENT OF MANAGING DIRECTOR, WHOLE-TIME DIRECTOR OR MANAGER [SECTION 196]

48. For appointment of person above age of 70 as MD / WTD / Manager, if special is not passed at General Meeting but Majority of members has approved it, then Board can make application to Central Govt. to appoint such person stating that such appointment is most beneficial to the Company.

MANAGERIAL REMUNERATION [SECTION 197]

49.No Central Government approval for payment of Managerial remuneration exceeding limits. Only get prior approval of Banks / PFI/ NCD holders / secured creditor if company has defaulted then get approval of members by Special Resolution in general meeting.

50.If director draws remuneration in excess of the limit or without approval then he shall refund such sums to the company within 2 years or such lesser period as may be allowed by the Company and until such sum is refunded, hold it in trust for the company. (earlier no such limit of 2 years, it becomes refundable immediately).

51.The company can waive the recovery of excess remuneration with by passing special resolution within 2 years from the date sum becomes refundable and with prior approval of prior approval of Banks / PFI/ NCD holders / secured creditor if company has defaulted. (earlier central government approval required).

52.Existing application to CG for managerial remuneration, the Company only need to obtain requisite approval as mentioned in Section 197.

PREFERENTIAL ALLOTMENT

53.Addition – subject to compliance of Chapter III.

RIGHT ISSUE

54.Addition – Now offer letter can be sent through courier or any other mode having proof of delivery in addition to registered post / speed post / electronic mode to all existing shareholders at least 3 days before opening of issue.

CHARGE

55.Registration of charges shall not apply to charges as may be prescribed in consultation with RBI.

56.If charge is not registered within 30 days, the person in whose favour charge is created can apply to ROC for registration of charge. (earlier time  Specified in Section 77 i.e. 30 + 300 days).

57.Satisfaction charge – can be filed after expiry of 30 days but not more than  300 days from the date of satisfaction of charge with payment of additional fees. (earlier after expiry of 30 days, condonation is triggered).

BENEFICIAL INTEREST IN A SHARE

58.Beneficial interest in a share - defined [Section 89 (10)] –

Beneficial interest in a share includes, directly or indirectly, through any contract, arrangement or otherwise, the right or entitlement of a person alone or together with any other person to –

(i)             exercise or cause to be exercised any or all of the rights attached to such share; or

(ii)           receive or participate in any dividend or other distribution in respect of such share.

59.Investigation of beneficial ownership of shares in certain cases (Section 90) – substituted. 

(a) The person directly or indirectly holds beneficial interest of not less than 25% in the shares of the Company, shall make a declaration to the Company, specifying the nature of interest and other particulars within in time limit as may be prescribed. The company to maintain the register of the same. 

(b)The Company shall file a return of significant beneficial owner and changes therein with ROC in the form as may be prescribed. 

(c) If company have any apprehension regarding any person is holding significant beneficial interest (25%) in the shares of the Company and that person has not declared the same as required under the Companies Act, the company shall issue notice to that person asking details in prescribed format. 

(d)Such person is required to provide details asked in 30 days from date of notice. 

(e) If such person fails to give details or details provided is unsatisfactory, the Company can approached within 15 days of the expiry of the period specified in the notice for direction that shares in question be subject to restrictions with regard to transfer of interest, suspension of all rights to the shares and such other matters as may be prescribed. 

(f)   Tribunal shall within 60 days from receipt of application passed order after giving opportunity of being heard.

DEPOSIT

60.Deposit repayment reserve: Reduced from 20% to 15% of amount maturing during following financial year (earlier maturing for next 2 years). Such reserve shall be deposited in the separate account in schedule bank on or before 30^th April every year (earlier no specific time limit).

61.Now defaulting company can accept deposit, after completion of 5 years from making the default good. (earlier – defaulting company cannot accept in any case).

62.Punishment for contravention of Section 73 or Section 76 

(a) fine amount shall not be less than Rs. 1 crore or twice the amount of deposit, whichever is lower (earlier fine amount was directly Rs. 1 crore).

(b)Officer in default shall be punishable with imprisonment of upto 7 years and fine not less Rs. 25 Lacs but upto 2 crore. (earlier imprisonment or fine)

63.Deposit Insurance – omitted.

NO. OF MEMBERS

64.In case Number of Members fall below prescribed limited (Private-2, Public-7), after expiry of 6 months, existing members will be personally liable for whole debt of the Company  contract for relevant time.

AUTHENTICATION OF DOCUMENT [SECTION 21]

65.Addition – In addition to KMP or officer of company, Board can now also authorised employee of the Company for signing the document or contract made by or on behalf of the Company.

PROSPECTUS

66.Omitted sub-sections 26(1)(a), 26(1)(b) and 26(1)(d) – regarding detailed disclosure and added that Prospectuses to state such information and such reports as may be specified by SEBI in consultation with CG.

67.Addition - Exemption from Civil Liability for misstatement in prospectus – if misstatement is made by expert.

VOTING RIGHTS [SECTION 47]

68.Addition – Subject to provision of Section 43 and sub-section (2) of Section 50 and Section 188(1) -  holder of equity share capital have a right to vote on every resolution placed before the Company…..

SHARES ISSUED AT DISCOUNT

69. Addition – Company may issue shares at a discount to its creditors when its debt is converted into shares in pursuance of any statutory resolution plan or debt restructuring scheme in accordance with guidelines issued by RBI.

ISSUE OF SWEAT EQUITY SHARES

70.Sub Section 54(1)(c) omitted – Now Company can issue sweat equity shares within 1 year from the date of commencement of business.

DIVIDEND

71.While calculating profits out which dividend is declared, amount representing unrealised gains, notional gains or revaluation of assets and any change in carrying amount of an asset or of a liability on measurement of the asset or the liability at fair value shall be excluded.

72.Interim Dividend – can be declared out of the profit of the Financial year till the quarter preceding the date of declaration of the interim dividend. (Earlier out of profit of the FY). If company has incurred loss during current FY upto the end of quarter immediately preceding the date of declaration of interim dividend, such interim dividend cannot be declared at a rate higher than the average dividends declared during immediately preceding 3 FY.

CHANGE IN DEFINITION

73.Associate Company – Amendment: 

(a) Significant influence be reckoned by controlling 20% of total voting power (earlier by controlling 20% of total share capital). 

(b) JV defined – Joint Venture means a joint arrangement whereby the parties that have joint control over the management have rights to the net assets of the arrangement.

74.Cost Accountant – addition – “who also hold a valid certificate of practice”.

75.Debenture  - exclusion - excluded instruments referred in Chapter III-D of RBI, Act and other prescribed instruments by Central Government.

76.Financial year – addition - Associated company of a company incorporated outside India can also apply to tribunal for different financial year.

77.Holding Company – addition - Holding Company includes Body Corporate. 

78.Interested Director – Definition – omitted.

79.Key Managerial Personnel – addition – Board can designate officer below one level of the Director who is in whole-time employment as KMP.

80.Net worth - addition - Debit and Credit balance of Profit and loss account.

81.Public Company: new addition: word “and” between two conditions.

Public Company means a company which:
 
(a) is not a private company; and
(b)has a minimum paid-up share capital as may be prescribed.

82.Related Party:

Addition – Body Corporate which is an Investing Company or the venture Company (body corporate whose investment in the company would result in the company becoming an associate of the body corporate).

Amendment – Body Corporate substitute Company

Any Body Corporate which Holding, subsidiary or an associate company; or a subsidiary of a holding company to which it is also a subsidiary or   an investing or venturer company.

83.Small Company:  maximum limit which can be prescribed

	Earlier	Now
Paid up capital	Rs. 5 crores	Rs. 10 Crores
Turnover	Rs. 20 crores	Rs. 100 Crores.

Turnover is calculated as per profit and loss account for the immediately preceding financial year. (Earlier last profit and loss account).

84.Subsidiary Company: control through more than one-half of the ‘total share capital’ is replaced with ‘total voting power’.

85.Turnover: Turnover means the gross amount of revenue recognised in the P/L from sales or services, or both, by a company during a financial year. (Earlier turnover was actual cash realisation from sale or services).