The government has carried out yet another round of changes in the Companies Act, 2013. These changes have been brought about by the Companies (Amendment) Act, 2017 (“Amendment Act”). This Act was notified on January 3, 2018. The Act aims at easing the conduct of business.
The Key Changes in Companies (Amendment) Act 2017
Followings are the key changes introduced by Companies (Amendment) Act 2017, resulting in ease of doing business in India
1. Effect of the Number of Members Falling Below the Minimum Requirement
New Section 3A makes every member of a company severally liable if a company (private or public) carries on business for a period of 6 months with members less than the minimum requirement that is seven members for a public company and two members for private company.
2. Private Placement Made Easy
The old section dealing with private placement has been completely replaced. No separate offer letter details are required for private placement anymore. This will reduce filings to the registrar. However, a cap of 50 persons has been imposed upon the number of persons to whom private placement can be made.
3. Affidavit Replaced by Self-Declaration
Earlier, subscribers to the memorandum were required to file an affidavit confirming their non-conviction in any offence. Now only a self-declaration is needed.
4. Online Annual Returns
The requirement to attach annual return physically with the board report has been done away with. Annual return can now be placed on the website and a link to the same to be provided in the report.
5. No Disclosure to Registrar
Section 93 which required disclosure of the change in shares of promoters has been omitted now.
Directors can now participate in a board meeting through video conferencing on certain restricted matters. The only requirement is the maintenance of quorum.
7. Director Identification Number (DIN) not Compulsory
DIN is now not compulsory for directors. Any other universal identification number can now be used as an identification document.
8. Loans to Directors
Now on the passing of a special resolution and following disclosure requirements, companies can give loans to entities in which directors are interested.
9. Rationalisation of Penalties
The penalties are now going to be in a proportion of the offence committed, injury caused and the nature and size of the company. The penalties for small and one person company are now going to be reduced.
Hence, the Amendment Act has come out with a series of positive changes. These would do away with the unnecessary hassle and will help in the comfortable conduct of business.
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