THE COMPANIES (AMENDMENT) BILL, 2014

 The Companies (Amendment) Bill, 2014 has been passed by Lok Sabha. This bill brings out the amendments to clear the practical difficulties and to promote the Commerce & Industry. The key highlights of the Bill are as follows:

1.  It removes the minimum pai-up capital requirements for incorporating a private/public company;

2.  The requirement of having a Common Seal is being optional from mandatory, so the consequential requirements of use of the Common Seal have also been amended;

3. The Bill has prescribed the punishment/ consequences for acceptance of public deposit in non-compliance with the deposit provisions read with the rules under the Act. i.e.

(i)   The amount of deposit along with the interests due will have to be returned;

(ii)   In addition to the above, the Company shall be liable for a fine not less than Rs. 1 Crore but which may extend to Rs. 10 Crores;

(iii)  every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees, or

with both:

4.  The great relief provided is that no person shall be entitled to inspect or obtain copies of the resolutions filed under section 117 of the Act;

5.For declaring dividend previous year losses and depreciation shall first be set off against the profit of the current year;

6. Again the major practical difficulty has been removed in the benefit of the public that only the dividend un-paid or unclaimed for consecutive 7 years shall be transferred to IEPF and not the shares;

7.Enabling threshold limits for reporting of frauds by the auditors;

8.  Empowering Audit Committee to approve the related party transactions , as may be prescribed;

9.The exemptions for applicability of section 185 , earlier mentioned in rules, has been added to section itself;

10.  Special resolution being replaced by ordinary resolution for approval of related party transactions at places, also exempted related party transactions between holding and wholly owned subsidiary, where consolidated accounts shall be made and presented in general meeting for shareholders’ approval;

11. Bail restrictions to apply only for offence relating to fraud u/s 447;

12. winding up cases to be heard by 2-member Bench instead of a 3-member Bench;

13. Special Courts to try only offences carrying imprisonment of two years or more.

As the bill has been approved by Lok Sabha, it is hopeful to get the further approvals soon and became the amendment act. But the corporate world and the professionals are still waiting for the proposed privileges to private companies to get approved, the draft of which has already been circulated by the Ministry. Furthrer the said bill doesn’t refer to the biggest problem of approval of related party transactions in Closely held companies and the difficulties of loan to directors etc. i.e. companies having common directors.

~By Nikita Singh~