Cabinet clears changes to Companies Act, 2013

The Union Cabinet has today approved the introduction of the Companies (Amendment) Bill, 2014 in Parliament to make certain amendments in the Companies Act, 2013, according to PIB release..The changes have been proposed to address the concerns raised by auditors and corporates and to make it easier for corporates to do business..The fourteen proposed amendments include:.1. Omitting requirement for minimum paid up share capital, and consequential changes.2. Making common seal optional, and consequential changes for authorization for execution of documents.3. Prescribing specific punishment for deposits accepted under the new Act. This was left out in the Act inadvertently.4. Prohibiting public inspection of Board resolutions filed in the Registry.5. Including provision for writing off past losses/depreciation before declaring dividend for the year. This was missed in the Act but included in the Rules.6. Rectifying the requirement of transferring equity shares for which unclaimed/unpaid dividend has been transferred to the IEPF even though subsequent dividend(s) has been claimed.7. Enabling provisions to prescribe thresholds beyond which fraud shall be reported to the Central Government (below the threshold, it will be reported to the Audit Committee). Disclosures for the latter category also to be made in the Board’s Report.8. Exemption u/s 185 (Loans to Directors) provided for loans to wholly owned subsidiaries and guarantees/securities on loans taken from banks by subsidiaries.9. Empowering Audit Committee to give omnibus approvals for related party transactions on annual basis. This would also align provisions of the Act with that of SEBI’s policy.10. Replacing ‘special resolution’ with ‘ordinary resolution’ for approval of related party transactions by non-related shareholders.11. Exempt related party transactions between holding companies and wholly owned subsidiaries from the requirement of approval of non-related shareholders.12. Bail restrictions to apply only for offence relating to fraud u/s 447.13. Winding Up cases to be heard by 2-member Bench instead of a 3-member Bench.14. Special Courts to try only offences carrying imprisonment of two years or more..The new Companies Act, which came into force with effect from April 1, has faced severe criticism for many of its provisions from various stakeholders. These changes once passed by the Parliament will bring into effect necessary amendments to the existing Act..So far out of 470 sections in the Act, 283 sections and 22 sets of Rules corresponding to such sections have been brought into force.