Key Amendments of Companies Act 2017 – Quick Summary
The Companies (Amendment) Bill, 2017 has received its acceptance from both statutory houses being Lok Sabha and Rajya Sabha on ‘‘27th July 2017 and 19th December 2017 respectively and has also received President’s assent on 3rd January 2018 .
The newly amended Companies Act 2017 is aimed at easing business compliances by facilitating ease of doing business, promoting growth and development of small business structures, harmonising accounting standards, improving regulatory and provisional procedures in Securities and Exchange Board of India Act, 1992, Reserve Bank of India Act, 1934 and the regulations made thereunder, rectifying present inconsistencies and omissions in the Act (2013).
Here is a list of Key Amendments Made by Regulatory Authorities in the Companies Act 2017 (Amended) :-
- No Central Government approval would be required for payment of remuneration made in excess of 11% of net profits.
- In addition to Directors and Managerial Personnel, an employee can also authenticate documents
- Officers not more than one level below the directors, who are working in whole time employment can be designated as KMP
- Annual General Meetings as held by Unlisted Companies can now be taken anywhere in India.
- Wholly Owned Subsidiaries (WOS) of any Foreign Company would be allowed to hold EGM (Extra Ordinary General Meeting) outside India.
- Partnership or LLP with 2 members would be able to convert it into a company being earlier restricted to 7 members.
- Declarations would be required, instead of affidavits for new company registrations.
- While incorporation, name reserved by Registrar of Companies shall be valid for only 20 days (from approval) instead of 60 days as earlier.
- Sweat Equity Shares can be issued at any time, as currently it is issued only after one year of commencement.
- Where a company is not required to appoint an independent director, it shall give two or more directors to its Corporate Social Responsibility Committee.
- Eligibility for doing CSR to be based on preceding ‘Financial Year’ instead of ‘Three Preceding Financial Years ’ as earlier.
- Directors residential status would be considered on ‘Stay in India’ for not ‘less than 182 days’ during a financial year than relating it to the previous calendar year.
- Criteria determined for maximum number directorship for any person will not include the dormant company.
- Filing of DIR-11 (filing of a copy of resignation to ROC by director itself) would be made optional.
Note: Director found in any disqualification under section 164(2) (being in default of filing financial statements, payment of interest etc) can vacate office in all other companies other than the company which is in default.
- Criminal liability in case of fraud proposed would be limited to partner(s) and would not include firm.
- Procedures for annual rectification of appointment of auditors by members would be omitted.
Fees and Penalties :
- Tribunal would be able to compound offences punished with fine or imprisonment being earlier compounded by Special Court only.
- Where a company fails to commit, submit, file, register or record any fact or information before the expiry of a specified period being relevant in different sections of the Act, the company and the officer without any prejudice to the liability would be liable for penalty and punishment provided by Companies Act 2017.
- In case of delay in filing of facts, information or documents to be submitted under section 92 (Annual Return) or 137 (Copy of financial statement to be filed with registrar) within the specified expiry period then instead of slab wise additional fees, a flat fee of Rs 100 per day would be required to be paid, different class of companies would subject to different penalty amount .
- The requirement of providing deposit insurance would be omitted.
- Private Placement offer letter shall not be enforced with the right of renunciation.
- Funds, as received under the private placement, shall not be utilised unless return of allotment is filled with ROC.
- Companies defaulted on repayment of deposits can also accept deposits after 5 years from the date of making the default good.
- An amount being not less than 20% (currently 15%) of the number of deposits, maturing during the following fiscal year would be required to be deposited on or before the 30th day of April each year in a scheduled bank in a separate bank account to be called deposit repayment reserve account.
Reports and Forms :
- A refined version of annual return form for OPC (One Person Company) and other Small companies would be prescribed.
- The omission of the requirement of MGT-9 has been proposed, instead, a copy of the annual return is to be uploaded on the company website, and its link shall be disclosed in Board’s report.
- Key Policies related to remuneration etc are to be uploaded on the company website and instead of exact text, policy links as disclosed on the website are to be disclosed in Board’s report.
- Disclosure by promoters and top ten shareholders with respect to 2% change in shareholding in a listed company is proposed to be omitted.
Also Read : Why are ‘Companies’ A Better Form of Business ?