13 July, 2015
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The President of India gave his assent to the amendments to the Companies Act, 2013 (Companies Act) in the Companies (Amendment) Act, 2015 (Amendment Act) on May 25, 2015. The Ministry of Corporate Affairs (MCA) has appointed May 29, 2015 as the date for commencement for most provisions of the Amendment Act. Some of the changes introduced by the Amendment Act, includeinter alia (a)removal of the minimum paid up share capital of Rs. 100,000 (USD 1,568 approx.) in case of private company, (b)removal of the minimum paid up share capital of Rs. 500,000 (USD 7,386 approx.) in case of public company, and(c) making optional the affixation of the common seal of a company. The Amendment Act has inserted a new Section 76A in the Companies Actto providefor penalties in case of violation of Section 73 (Prohibition on acceptance of deposit from public) of the Companies Act, and Section 76 (Acceptance of deposit from public by certain companies) of the Companies Act. These penalties inter alia include a fine up to INR 100,000,000 (USD 1,567,399approx.) for the defaulting company and imprisonment up to 7 years or fine for defaulting officers of the defaulting company. The Amendment Act also clarifies that Section 185 of the Companies Act, 2013 will not apply toloans made by a holding company to its wholly owned subsidiary or to any guarantee given or security provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company, if the loan is used by the subsidiary for its principal business activity. While the foregoing exemption to Section 185 of the Companies Act was also present in Rule 10 of the Companies (Meetings of Board and its Powers) Rules, 2014, its inclusion in the Companies Act itself is welcome.
Corresponding changes have been carried out in Companies (Share Capital and Debenture) Rules, 2014 and Companies (Registration of Charges) Rules, 2014.
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Exemption to private companies under Section 462 of Companies Act, 2013
Pursuant to the notification dated June 5, 2015 of the MCA, private companies are now exempt from the applicability of certain provisions under the Companies Act including inter alia Section 160 (Right of persons other than retiring directors to stand for directorship),Section162 (Appointment of director to be voted individually), Section 180 (Restrictions on powers of Board), Section 185 (Loan to directors). Section 184(2) of the Companies Act, 2013 that prescribed restrictions on directors from participating in meetings where matters in which they are interested are discussed will also no longer apply to private companies, subject tothe priordisclosure of such interest. These exemptions became effective on publication of the notification in the official gazette.
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For further information, please contact:
Abhishek Saxena, Partner, Phoenix Legal
abhishek.saxena@phoenixlegal.in
