The Companies (Amendment) Bill 2014 was passed by voice vote by the Rajya Sabha on Wednesday, even as Finance Minister Arun Jaitley said the Companies Act will be reviewed further by an expert committee to examine the possibility of improving it.
Sixteen amendments were made to the Companies Act of 2013, pertaining to winding up of companies, board resolutions, bail provisions and utilization of unclaimed dividends
“A broad-based committee will continue to go into this question for the next few months as to where the shoe pinches, and this may not be the last amendments which we are bringing in,” Mr. Jaitley said, replying to the debate on the bill..
Mr. Jaitley said the amendments were necessitated as there have been complaints from companies about the problems ever since the law was enacted in 2013.
He said the amendments were also aimed at simplifying bail provisions.
“Except in various issues of serious frauds, normal CRPC (Criminal Procedure Code) provisions,” would apply, Mr. Jaitley said.
The expert committee comprising representatives of bodies of company secretaries, chartered accountants, industry chambers and officials will look into the discrepancies and suggest changes, he added.
The Lok Sabha had passed the Companies (Amendment) Bill, 2014, in December last year.
The amendments to the Companies Act, 2013, which came into effect from April 1 this year, are designed to address some issues raised by stakeholders.
Among the major concerns of stakeholders was protecting confidentiality of board resolutions, as well as the provision of auditors being required to report suspected frauds at the companies audited by them.
Citing the provision on the public scrutiny of board resolutions, Mr. Jaitley said that nowhere in the world was such a practice being followed.
“A company deciding in its board on its next model, a new product trademark or the funding mechanism would not like such matters to be known to competitors,” Mr. Jaitley said.
Towards meeting a “corporate demand”, the relevant amendment now prohibits public inspection of board resolutions filed in the registry.
Under the new norms, the paid-up capital criteria has been scrapped while threshold limits for various transactions for getting shareholders’ nod has now been stipulated.
Another amendment approves prescribing specific punishment for deposits accepted a condition that was left out in the act inadvertently.
“While enforcing the provision, we found that there were certain difficulties with regard to the enforcement of certain provisions or certain errors, while drafting had taken place,” Jaitley said earlier, regarding the scope of the present amendments.
Stakeholders were also concerned that stringent regulations for related party transactions, or those transactions between the company and another in which a board member or members are interested, could hurt routine business activity.
The amendment also exempts corporates from the need to get shareholders’ nod in the case of related party transactions valued lower than Rs.100 crore or 10 percent of net worth.
Under the old system, shareholders’ permission through a special resolution was required in case of related party transactions for all firms with a paid up capital of Rs.10 crore or more.
Another amendment exempts related party transactions between holding companies and wholly owned subsidiaries from the requirement of approval of non-related shareholders.
Source: THE HINDU