The Companies (Amendment) Act, 2017 (“Amendment Act”) received the President’s assent on 3rd January, 2018. The amendments seek to address implementation challenges and facilitate ease of doing business. The Amendment Act also seeks to clarify omissions and inconsistencies contained in the Companies Act, 2013. The Amendment Act has brought about amendments to the Companies Act, 2013 relating to structuring and compliance and disclosure requirements.
The Amendment Act brings about a simplification of the private placement process. This has been done by reducing the number of filings to be made with the Registrar of Companies and removing the need for separate offer letter details. There is also a restriction on the utilisation of funds raised through private placement unless allotment has been made and the return of allotment has been filed with the registrar. Additionally, the definition of private placement will now permit the offer of multiple security instruments concurrently and covers all security offers other than rights
The Amendment Act also seeks to harmonise the Companies Act, 2013 with SEBI and RBI’s rules and regulations. For example, the sections that dealt with insider trading and forward dealing have been omitted as these illicit activities are satisfactorily covered by SEBI regulations. The RBI can now disqualify certain instruments as debentures as per the amended definition of debentures.
The Amendment Act provides clarification with regard to the disqualification of independent directors. As per Section 149(6) of the act, a disqualification of an independent director is allowed on the grounds of the person having a pecuniary relationship with “the company, its holding, subsidiary or associate company, or their promoters, or directors”. The amendment states that remuneration or transactions with the director that does not exceed 10% of his total income or an amount as prescribed will be excluded from the understanding of “pecuniary relationship”. Finally, the Amendment Act has introduced certain factors that will be taken into account while levying punishments and penalties. These factors are the size of the company, injury to public interest, nature of business, seriousness and recurrence of default, etc. The amendment also limits the penalties for one person companies and small companies. This is the second instance of the Companies Act, 2013 being amended by the current government and brings about many changes to the current act.
January 17th, 2018