The Companies Law Committee was constituted in June 2015 for examining and making recommendations on the issues arising out of implementation of the Companies Act, 2013. The Committee submitted its report to the Government today.
The Companies Law Committee was constituted in June 2015 for examining and making recommendations on the issues arising out of implementation of the Companies Act, 2013. The Committee submitted its report to the Government today.
Some of
the key changes proposed are listed below:
a)
Managerial remuneration to be approved by shareholders. [s. 197, 198]
b)
Modify definition of associate company and subsidiary company to ensure that
‘equity share capital’ is the basis for deciding holding-subsidiary
relationship rather than “both equity and preference share capital”. [s. 2]
c)
Private placement process to be substantially simplified, doing away with
separate offer letter, making valuation details public, details/record of
applicants to be kept by company and to be filed as part of return of allotment
only, and reducing number of filings to Registrar. [s. 42]
d)
Incorporation process to be made easier and allow greater flexibility to
companies: An unrestricted objects clause to be allowed in the Memorandum of
Association dispensing with detailed listing of objects, self-declarations to
replace affidavits from subscribers to memorandum and first directors; changes
also in various Forms. [s. 4, 7]
e)
Provisions relating to forward dealing and insider trading to be omitted from
Companies Act. Listed companies are covered under SEBI Act/Regulations. [s.
194, 195]
f)
Companies may give loans to entities in which directors are interested after
passing special resolution and adhering to disclosure requirement. [s. 185]
g)
Restriction on layers of subsidiaries and investment companies to be removed.
[s. 2(87), 186(1)]
h)
Change in the definition of term ‘relative’ for determining disqualification of
auditor [s. 141]
i)
Rationalize penal provisions with reduced liability for procedural and
technical defaults. Penal provisions for small companies to be reduced. [
various sections]
j) No
filing fees if financial statements and annual returns filed within prescribed
time. [s. 403]
k)
Auditor to report on internal financial controls with regard to financial
statements. [s. 143]
l)
Frauds less than Rs. 10 Lakh to be compoundable offences. Other frauds to be
continued to be non-compoundable. [s. 447]
m)
Reducing requirement for maintaining deposit repayment reserve account from 15%
each for last two years to 20% during the maturing year.
n)
Foreign companies having insignificant/incidental transactions through
electronic mode to be exempted from registering and compliance regime under
Companies Act, 2013. [s. 379]
o)
Disclosures in the Directors’ Report to be simplified and duplications with
SEBI’s disclosure requirements and financial statements to be removed while
retaining the informative content for shareholders. [s. 134, Rules]
p)
Increased threshold for unlisted companies for compliance in context of
requirement for Independent Directors (IDs), Audit Committee and Nomination and
Remuneration Committee. [s. 149, 177, 178]
q)
Test of materiality to be introduced for pecuniary interest for testing
independence of ID; thresholds for relatives’ pecuniary interest to be revised
to make it more practical. [s. 149]
r)
Requirement for a managerial person to be resident in India for twelve months
prior to appointment to be done away with. [Schedule V]
s)
Disclosures in the prospectus required under the Companies Act and SEBI
Regulations to be aligned, with a view to make these simpler, by allowing
prescriptions to be as per SEBI Regulations. [s. 26]
t)
ESOPs to be allowed to promoters working as employees/directors [s.62, Rules]
u)
Limit on sweat equity to be raised from 25% of paid up capital to 50% for
start-ups. [s.54]
v)
Recognition of the concept of beneficial owner of a company proposed in the
Act. Register of beneficial owners to be maintained by a company, and filed
with the Registrar. [New section]
w)
Provisions with regard to consolidation of accounts to be reviewed and those
with respect to attachment of standalone accounts of foreign subsidiaries to be
relaxed in certain cases. [s. 129, 136]
x)
Re-opening of accounts to be limited to 8 years. [s. 130]
y)
Mandatory requirement of taking up some items only through postal ballot to be
relaxed in case of a company that is required to provide electronic voting at
its General Meetings. [s. 110]
z) Requirement for annual ratification of
appointment/continuance of auditor to be removed. [s. 139]
The Companies Law Committee was constituted in June 2015 for examining and making recommendations on the issues arising out of implementation of the Companies Act, 2013. The Committee submitted its report to the Government today.
Reviewed by CS DIVYANSHU SAHNI
on
00:41
Rating:
No comments: