In this blogpost, Harsha Asnani, student, NIRMA University, Ahmedabad writes about the major key amendments that have been brought to the Companies Act, 2013 by an enactment of an amendment in the year of 2015.

In the year of 2013, the Indian Government had received various suggestions from the industrial stakeholders to make certain amendments in the Companies Act, 2013. In lieu of the same, the Companies (Amendment) Act had been passed in the year of 2015 after it received its assent from the both the Houses of the Parliament and assent from the President of India. Although the amendment has taken care of a lot of concerns but a few still need to be addressed by the Government.[1] In order to maintain the consistency between the amended and the rules, the Ministry of Corporate Affairs has also issued relevant amendments in the CA 2013 (namely, the Companies (Share Capital and Debenture) Second Amendment Rules, 2015, the Companies (Declaration and Payment of Dividend) Secondment Amendment Rules, 2015, the Companies (Incorporation) Second Amendment Rules, 2015, the Companies (Registration of Charges) Amendment Rules, 2015 and Companies (Registration Offices and Fees) Second Amendment Rules, 2015).

Major Highlights of the amendment

Following are the major highlights of the amendment made to the Companies Act:

1. No Minimum Paid up Capital – Earlier the business organisations which wanted to take up a company as the preferred form of business organisation had to fulfil the requirement of minimum paid-up share capital of not less than Rs. Five lakhs in case of public company and Rs. One lakh in case of private companies by way of Section 2(71) and 2(68) respectively. However, after the recent amendment, this requirement is scrapped, and a company can go ahead with its incorporation without fulfilling this criterion.
2. Commencement of business – Earlier, according to Section 11, before the company could commence its business, the director of the respective company was required to fill up a declaration with the Registrar of Companies, that every subscriber of the memorandum has paid the amount that he or she had pledged to or was required to and hence the share capital of the company is not less than the amount which has been prescribed by the statute. With the passing of the amendment, Section 11 stands to be omitted. Therefore, the director is no longer obliged to provide such a declaration. As a consequence to this, the fillings to be made by companies in India have reduced.
3. Common seal – An amendment has been made in section 12 subsequent to which the requirement of making a common seal has now become optional. Due to this changes have been made accordingly with regard to authorization for execution of documents. An earlier common seal was required in several financial instruments such as the bill of exchange, share certificates etc. With the amendment in the requirement of the common seal, several sections such as section 9, 22, 46, 223 which mandate common seal in the Companies Act have been amended.
4. Contravention of Section 73 and 76- A new section has been inserted in the Companies Act via Section 76A. It lays down punishment in case any of the following situation arises:

• Where a company has invited or accepted on its own or on behalf of any other person in a manner that is in contravention to the manner mentioned in Section 73 or 76;
• If the company fails to pay the part of deposit or interest within the time mentioned in Section 73 or 76.

The punishment that shall be levied is as follows:

• The company shall be punishable and will have to pay a fine of least one crore rupees and not more than ten crore rupees along with the payment of interest and deposit.
• Every officer who is liable for this default shall be punishable with a term which may extend to seven years along with fine which may range between twenty-five lakhs to two crore rupees.

5. Reporting by the auditor in respect of fraud – The Company law (Amendment) Act has taken the provision under section 143(12) by placing an obligation on the board of directors to now include all the details in respect of the frauds of which the auditors have reason to believe have been committed. Also, an enabling provision created via this amendment is that a fraud can be reported to the Central Government if it has crossed a threshold.
6. Obtaining copies of the board resolution – As per the newly amended law, no person shall be entitled to obtain or inspect copies of the resolution of the board that are filed with the registrar. As per the earlier law, certain resolutions such as all special resolutions, resolutions for terms of appointment of managing director, winding-up resolutions, resolutions in relation to the sale of undertaking / borrowings, etc. Could be obtained for inspection purposes. However, with the change in the legal position, this access has been limited.
7. Dividend Declaration – The new amendment has inserted a new proviso in the Companies Act according to which the company cannot declare a dividend for its shareholders unless the losses or depreciation of the previous years are not carried forward or written off against the profit of the current year.
8. Related Party Transactions – According to section 188 of the Companies Act, 2013, before a company enters into a contract or agreement with a related party , it has to fulfil certain prescribed conditions and with the consent of the Board of Directors through the passing of a resolution at the board meeting. With the amendment, the changes that have been brought to this section are that firstly, the word special has been omitted. Now the resolution could be passed with a resolution and not necessarily with a special resolution. Secondly, earlier a special resolution was required to be passed in case of related party transactions between the holding and subsidiary company.  This amendment has removed this requirement as well as a condition that the accounts of the subsidiary company are consolidated with the subsidiary company.
9. Loan to directors – Under the Companies Act, section 185, a company give loans, guarantees and securities to its directors or other persons in whom the interest of the directors lie. However, with the amendment, certain additional exceptions have been inserted to this section according to which nothing contained in Section 185 shall apply to loans or guarantees given by the holding company to the subsidiary company and guarantee given by the holding company in respect of the loan of its subsidiary company by a bank or financial institution.
10. Special Court – Earlier according to section 435 and 436, the Central Government had the power to set up courts which shall be empowered to try offences mentioned under the Companies Act, 2013. However, with the amendment coming into force, the special courts shall no longer have the jurisdiction to try all the offences mentioned the Companies Act, 2013. Now, they shall try only those offences which are punishable with imprisonment up to two years. The jurisdiction of trying all other offences shall now remain with the Metropolitan Magistrate or the Magistrate of First Class.

[1]http://www.mondaq.com/india/x/410320/Corporate+Commercial+Law/Companies+Amendment+Act+2015+Key+Highlights