Companies amendment bill 2014 (highlights)

1. Companies Amendment
Bill, 2014
M. BUHA & CO.
C O M P A N Y S E C R E T A R I E S
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Opp. Hotel Suray,
Sayajigunj,
Vadodara-05.
Email:
m.buha.pcs@gmail.com
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(m): +91 88 666 22 111
www.mbuha.com

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The Companies (Amendment) Bill 2014 was
introduced in Lok Sabha by Shri. Arun Jaitley
on 08th December 2014 and same been
passed by Lok Sabha on 17th December 2014.
But in order to get it enforced; it has yet to
pass through Rajya Sabha then to get positive
assent of Hon’ble president of India and
(afterwards) it has to notified in Official
Gazette of India for its valid enforcement.
Nomenclature:
‘the Bill’ shall means Companies (Amendment) Bill 2014;
‘CA, 2013’ shall means Companies Act, 2013;
‘CA, 1956’ shall means Companies Act, 1956;
‘CS’ shall means Company Secretary;
‘Auditor’ shall means Statutory, Secretarial or Cost Auditor of the Company;
‘Ministry’ shall means Ministry of Corporate Affairs
‘OPC’ shall means One Person Company;
‘RoC’ shall means Registrar of Companies;
‘MD’ shall means Managing Director;
‘WTD’ shall means Whole-time Director
Flow chart for law enforcement
Lok Sabha approval
Rajya Sabha approval
President Assent
Gazette Notification

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Important Highlights
of the Bill and its impact on incorporated Companies:
Minimum paid-up capital criteria abolished:
Even under CA, 1956 it was specified that a private company can
incorporate / shall continue to have minimum paid-up capital of Rs. 1 Lakh
viz-a-viz a public company can incorporate / shall continue to have
minimum paid-up capital of Rs. 5 Lakhs and the same provisions also bring
up in the CA, 2013. The concept of OPC first time introduced in India and
OPC be treated as Private Company under the CA, 2013 so it also governed
by minimum paid-up capital criteria. Under the Bill it has been proposed to
remove minimum paid-up capital criteria for both type of companies viz.
private and public company.
Common seal would become optional:
Under the CA, 1956 & 2013 it was mandated to have common seal with a
Company upon its Incorporation but under the Bill it is proposed to remove
the mandatory requirements of common seal.
Upon enforcement of the Amendment Act, 2014 wherever the reference of
‘Common Seal’ is provided shall be interpreted as ‘Common Seal, if any’.
Major following sections got affected upon enforcement:
1. S.22(2): the company can authorize (in case a company does not have a
common seal) any person as an attorney under the signature of two
directors or a Director and CS if it has appointed CS, if any. After
enforcement of the Bill, no documents under the common seal is required
for such authorization.
2. S. 46: Share certificate shall not require to issue under the Common
Seal. If the Company has Seal then it could be otherwise it should be
signed by two directors or by a director and the CS, wherever the
company has appointed a CS.
Specific penalty will impose on violation of ‘Deposit’ provisions:
After S. 76 a new Section 76A introduced in the Bill. Presently under the CA,
2013 there is no specific penalty provided for any contravention of the
provisions of Chapter V (Acceptance of Deposit) by a Company. Presently
violation of S. 73 or S. 76 would attract general penalty / punishable u/s.
450 of the CA, 2013. But under the Bill it was specified that, if the Company
accepts or invites or allows or causes any other person to accept or invite on

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its behalf any deposit in contravention of the manner or the conditions
prescribed under section 73 (acceptance of Deposit from Shareholders) or
section 76 (acceptance of Deposit from Public) or rules made thereunder or if
a company fails to repay the deposit or part thereof or any interest due
thereon within the time specified under section 73 or section 76 or rules
made thereunder or such further time as may be allowed by the Tribunal
under section 73 :-
(a) the company shall, in addition to the payment of the amount of deposit
or part thereof and the interest due, be punishable with fine which shall
not be less than one crore rupees but which may extend to ten crore
rupees; and (Minimum fine is one crore rupees)
(b) 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: (Minimum fine for officer who had made
default is twenty-five lakh rupees)
Provided that if it is proved that the officer of the company who is in default,
has contravened such provisions knowingly or wilfully with the intention to
deceive the company or its shareholders or depositors or creditors or tax
authorities, he shall be liable for action under section 447 (Fraud).
Certain resolutions would not be available on public domain for inspection:
U/s. 179 of the CA, 2013; following resolutions of the Board shall require to
file with RoC in form MGT-14:
1. To make calls from shareholders;
2. To authorize Buy-back;
3. To issue securities;
4. To borrow monies;
5. To invest funds of the Company;
6. To grant loans or give guarantee or provide security in respect of loans;
7. To approve financial statement and Board’s report;
8. To diversify the business of the Company;
9. To approve amalgamation, merger or reconstruction;
10. To take over a company;
11. To make political contribution;
12. To appoint or remove Key managerial personnel (KMP) and one level
below the KMP;
13. To appoint Internal Auditor and Secretarial Auditor;
14. To take note of disclosure of directors interest and shareholding;
15. To buy, sell investment constituting 5% or more paid-up capital and
free reserve of Investee Company;
16. To invite or accept or renew public deposit;

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17. To approve quarterly, half yearly and annual financial statements or
results.
Lots many industries had raised their concern about confidentiality of their
internal transactions so Ministry has considered their representation and
proposed under the Bill that foregoing enlisted resolutions would not be
available on public domain for public inspection.
Previous losses and depreciation shall be set-off before declaration of
Dividend:
Under the CA, 1956 the provision for setting off carried forward losses and
depreciation against the current year’s profit was there but inadvertently the
same was missed by Ministry while drafting of CA, 2013. Now, again the said
provision reintroduced in the Bill. Upon enforcement of the Bill; companies
shall have to ensure that carried forward previous losses and depreciation
not provided in previous year or years are set off against profit of the
company for the current year then the Company could able to declare
dividend.
Reporting of fraud caused by officers or employees of the Company:
Due to Satyam scam and role played by its Auditors for hiding of the fact
(fraud), S. 143 (12) was introduced first time under the CA, 2013. As per the
proviso, an Auditor during the course of his/her/their audit identified any
fraud caused to the Company by any of its officer or employee, shall inform
to Board or Audit Committee, if any, and upon receipt of comment of Board
or Audit Committee on the report of the Auditor the Auditor concern shall
forward his report to Central Government. But no quantum amount of fraud
mentioned in said section.
But in the Bill, it is proposed that, any fraud identified by Auditors of the
Company beyond certain sum as may be prescribed1 shall report to the
Central Government but the amount involved in the fraud lesser than the
amount prescribed above in that case the Auditor shall inform to Board or
Audit Committee, if any, of the Company. Provided that if the Auditor has
reported to Board or Audit Committee the fraud but not reported to the
Central Government in that case the Board shall disclose the details about
such frauds in the Board's report.
1
Yet not prescribed

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Additional exemptions provided in the provisions of Section 185 of the CA,
2013 (Loans to Directors etc.):
Erstwhile Section 195 of the CA, 1956 was applicable to only Public
Company and Private Company which is subsidiary of Public Company but
Section 185 of the CA, 2013 made applicable to all the Companies without
any exclusion. U/s. 185 restriction imposed on the Company in respect of
funding any loans or providing any guarantee or securities against loans
given by any other party (directly or indirectly) to any Director of the
Company or Firm in which such Director / his relatives are partner or to
Private Company in which such director is director / member or any body
corporate wherein such director has control beyond threshold as provided
u/s. 185 except the loan provided by the Company in ordinary course of
business or given to MD or WTD as a part of the conditions of his service.
The Bill proposed following two more exemptions in addition to exemptions
discussed above:
1. any loan made by a holding company to its wholly owned subsidiary
company or any guarantee given or security provided by a holding
company in respect of any loan made to its wholly owned subsidiary
company; or
2. any guarantee given or security provided by a holding company in respect
of loan made by any bank or financial institution to its subsidiary
company:
Provided that the loans made under clauses (1) and (2) are utilised by the
subsidiary company for its principal business activities.
Requirement of ‘Special Resolution’ u/s. 188 (Related Party Transactions) is
removed from the section and replaced by the word ‘Resolution’ i.e. ‘Ordinary
Resolution’. But requirement of passing the ‘resolution’ shall not be
applicable for transactions entered into between a holding company and its
wholly owned subsidiary whose accounts are consolidated with such holding
company and placed before the shareholders at the general meeting for
approval.
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