Corp Affairs Ministry circulates draft to amend new Cos Act

Nov 20, 2014,  The Ministry of Corporate Affairs (MCA) has circulated a draft Cabinet note to amend the new Companies Act, sources tell CNBC-TV18’s Malvika Jain. Since the new Companies Act came into being there has been demand from the industry to amend it due to want of ‘practicality’ in certain clauses. According to sources, the Companies Act Amendment Bill 2014 seeks to amend seven key provisions. The government hopes to table it in the Winter Session, scheduled to begin November 24. Sources say the ministry seeks amendment of Sec 188(1) linked to related party transactions; Sec 143(12) and 143(15) on fraud reporting by auditors. According to sources, MCA seeks auditor to report fraud above mandated threshold to government and (fraud) below mandated threshold to company’s audit committee. It also seeks fraud reporting threshold to be related to net profit or turnover of the company. The ministry also seeks to protect confidentiality of board resolutions and wants it to be filed with registry, while banning public inspection of such matters. It also wants to amend Sec 419(4) linked to NCLT special bench (with two-member bench instead of three) for winding up of companies, thereby speeding up the process. Putting forth the proposal that only severe offences be tried by special judge and rest by magistrates, the draft also seeks to amend Sec 435, 436 and 440. It also wants to rationalise punishment for offences related to deposits and remove restrictions on bail for violating the act. According to MCA sources, the draft is in the process of receiving comments from various ministries. The government hopes to finalise cabinet note on Companies Act amendment by first week of December.