Pursuant to the Companies (Amendment) Ordinance, 2018 (“Ordinance”) promulgated by the President of India on November 2, 2018, the Ministry of Corporate Affairs (“MCA”) has issued another notification proposing to bring in further amendments (“Draft Amendments”) to the Companies Act, 2013.
The MCA believes that the Ordinance does not completely satisfy the need of the hour and has proposed further amendments of urgent nature to strengthen the corporate governance & enforcement framework.
Comments and suggestions on the Draft Amendments are invited till November 20, 2018 and may be sent through e-mail at comments_rbcao@mca.gov.in.
The format for sending in comments has been specified as follows:
- Name, contact number, e-mail address and postal address of stakeholder
- Suggestions/comments as under :
| Serial Number | Clause / Sub Clause | Suggestion / comments | Justification |
Key Highlights:
Ø The proposed amendment will require the Prospectus to be filed and not registered.
Ø As per the Draft Amendment the company will also have to take all necessary steps to find out if there is any individual who is a significant beneficial owner in relation to the company and if so, to identify him and require him to comply with the provisions of this section. On failure to take such necessary steps, fine not less than Rs.10 lakh but which may extend to Rs. 50 lakh and where the failure is a continuing one, with a further fine which may extend to Rs.1000 for every daywill be imposed.
Ø For new companies, where the company has not completed the period of three financial years since its incorporation, it will have to comply with its Corporate Social Responsibility Policy for such period that has elapsed since its incorporation.
Ø Further, any amount remaining unspent under the CSR Policy must be transferred by the company within thirty days from the end of the financial year to a special account, the Unspent Corporate Social Responsibility Account, opened by the company for that financial year in any scheduled bank. Such amount must be spent by the company in pursuance of its Corporate Social Responsibility Policy within a period of three financial years from the date of such transfer.
Ø For any person, who has or had no pecuniary relationship, other than remuneration as such director or having transaction not exceeding ten per cent. of his total income, with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year, to be identified as independent director the following must be ensured-
- the total pecuniary relationship must not exceed twenty-five per cent. of his total income, of which, professional or any services rendered by him, other than such services, as may be prescribed, shall not account for more than ten per cent. of his total income:
- the remuneration received and expenses incurred for participation in the Board and other meetings must not be accounted for determining the total pecuniary relationship, unless otherwise provided.
Ø Independent director in addition to giving declaration of independence at Board Meeting and change in circumstances will have to file a return with the Registrar, containing particulars of his independence.
Ø An independent director, on resignation, must forward a copy of his resignation along with detailed reasons for the resignation to the Registrar within seven days of giving notice. The resignation of an independent director will take effect on the 30th day from the date of receipt of notice by the company under sub-section or such later date as may have been specified in the notice
Ø Where a decision of the Tribunal results in the termination, setting aside or modification, of any agreement, between the company and the managing director, any other director or manager, such person must not hold the office of a director or any other office connected with the conduct and management of the affairs of any company for a period of five years, and will not be paid, any compensation for the loss or termination of office.
Ø Upon the dissolution of a company, all property and rights vested in or held on trust for the company (excluding property held by for another person), will vest in the Central Government immediately before the dissolution.
Ø As per the Draft Amendments, a company will no longer be wound up by passing a special resolution. Further, inability to pay debts will not be a circumstance for winding up of unregistered companies.
Source: Ministry of Corporate Affairs
