The Government of India introduced the Companies (Amendment) Bill, 2016 in the Lok Sabha on 16th March, 2016, which proposes to make several amendments to the existing Companies Act, 2013. The proposed Amendment bill attempts to adopt the recommendations advanced by the Companies Law Committee in its February, 2016 report. Some of the major amendments proposed under the Bill are elicited below:
- Broadening the Ambit of the Object Clause: Section 4(1)(c) which merely provided for specifying the objects for which the company was being incorporated in the Memorandum, has been expanded in scope to engage in any lawful act or activity or business to pursue any specific object or objects.
- Filing of Return for Stake Change Omitted: Section 93 of the existing Act is proposed to be omitted, which requires a company to file a return with respect to change in the number of shares held by promoters and top ten shareholders of such company within fifteen days of such change.
- Flexibility in Venue for Company Meetings: Section 96(2) of the existing Act which compelled the annual general meetings to be held either at the registered office of the company or at some other place within the city/town/village of the registered location has been relaxed for the unlisted companies by allowing them to hold an AGM at any place in India once consented to by all the members in advance.
- Presence of Director(s) within India: Companies Act, 2013 requires at least one director to have stayed in India at least for a total period of one hundred and eighty-two days in the previous calendar year under Section 149(3). However, the amending Bill requires at least one director to stay in India for a total period of one hundred and eighty-two days during the financial year.
- Pecuniary Interest of Independent Directors: Section 149(6)(c) of the Companies Act, 2013 excludes a person to act as an independent director who has or had any pecuniary relationship with a company during the two immediately preceding financial years whereas the proposed amendment substitutes the words “pecuniary relationship” with “pecuniary relationship, other than remuneration as such director or having transaction not exceeding ten per cent of his total income” – to let an independent director enjoy his independence unless he has transactions with the company exceeding ten per cent of his total income with the company.
- Enabling video-conferencing of Directors in Board Meetings: Proviso to Section 173(2) of the existing Act restricts attendance in a meeting dealing with particular subject-matters notified by the Central Government through video conferencing or other audio visual matters. However, the Bill adds a further proviso to that stating that where there is quorum in a meeting through physical presence of directors, any other director may participate through video conferencing or other audio visual means in such a meeting.
- Approval to Giving of Loans, Guarantees or Securities: Section 185 of the Act restricted the advancing of loans, guarantees or securities to the directors. However, the amending Bill by substituting the existing section with a new one enables the directors to obtain loans from the company upon the passage of a special resolution approving the giving of loans, guarantees or securities.