STATEMENT OF
\nOBJECTS AND REASONS<\/p>\n

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Companies Act, 2013 (Act) was notified on
\n29th August, 2013. Barring provisons relating to Chapters XV to XX and certain
\nother provisions relating to setting up of\/exercise of powers by National
\nCompany Law Tribunal (NCLT)\/National Company Law Appellate Tribunal (NCLAT);
\nInvestor Education and Protection Fund (IEPF’); National Financial Reporting
\nAuthority (NFRA) and Special Court, all provisions of the Act have been brought
\ninto force with effect from 1st April, 2014.<\/p>\n

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After the commencement of provisions of the
\nAct, Government have received representations from various stakeholders
\n(including Industry Chambers, Professional Institutes, Legal Experts and
\nMinistries\/Departments) expressing practical difficulties in complying with
\nsome of the requirements laid down in the commenced provisions. It was noted
\nthat some of the issues raised and suggestions made can be addressed only by
\nway of amendent in the Act and their immediate resolution is also considered to
\nbe necessary. Some of the amendments are also required with a view to further
\nfacilitate ‘ease of doing business’ and deal with certain difficulties in this
\nbehalf brought out by Industry Chambers and other agencies.<\/span><\/p>\n

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The proposed amendments deal with related
\nparty transactions, fraud reporting by auditors, public inspection of Board
\nresolutions, responsibilities of audit committee, restrictions on bail, making
\ncommon seal optional, requirement for minimum paid-up share capital, strength
\nof benches for hearing winding up cases, jurisdiction of special courts to try
\noffences.<\/p>\n

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Amendments are also being proposed in the
\nAct to incorporate some of the provisions earlier left out inadvertently,
\nsetting off of past losses\/depreciation before declaring dividend and exemptions
\nfor giving of loans\/guarantee\/security by holding companies to its
\nsubsidiaries.<\/p>\n

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Accordingly,
\nit has been decided to move amendments in the Act through an Amendment Bill.
\nThe Bill, namely, the Companies (Amendment) Bill 2014, inter alia,<\/em>
\ncontains the amendments to the Companies Act, 2013 as under:\u2014<\/span><\/p>\n

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(i<\/em>) to
\namend clauses (68<\/em>), (71<\/em>) of section 2 and section 11 of the said
\nAct to omit the requirement for minimum paid-up share capital, and
\nconsequential changes;<\/p>\n

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(ii<\/em>) to
\namend sections 9, 12, 22, 46 and 223 of the said Act for making common seal
\noptional, and consequential changes for authorisation for execution of
\ndocuments;<\/p>\n

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(iii<\/em>) to
\ninsert a new section 76A to provide for punishment for deposits accepted in
\nviolation of the provisions of the said Act;<\/p>\n

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(iv<\/em>) to
\namend clause (g<\/em>) of sub-section (3<\/em>) of section 117 to prohibit
\npublic inspection of Board resolutions filed in the Registry;<\/span><\/p>\n

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(v<\/em>) to
\namend sub-section (1<\/em>) of section 123 of the said Act to include
\nprovisions for writing off past losses\/depreciation before declaring dividend
\nfor the year;<\/p>\n

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(vi<\/em>) to
\namend sub-section (6<\/em>) of section 124 of the said Act for rectifying the
\nrequirement of transferring equity shares for which unclaimed\/unpaid dividend
\nhas been transferred to the Investors Education and Protection Fund even though
\nsubsequent dividend(s) has been claimed;<\/p>\n

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(vii<\/em>)
\nto amend sub-section (3<\/em>) of section 134 and sub-section (12<\/em>) of
\nsection 143 of the said Act to incorporate enabling provisions to prescribe
\nthresholds beyond which fraud shall be reported to the Central Government
\n(below the threshold, it will be reported to the Audit Committee). Disclosures
\nfor the latter category also to be made in the Board’s Report;<\/span><\/p>\n<\/div>\n