Highlights of Companies Amendment Act 2015
Highlights of Companies Amendment Act 2015 The much-anticipated Companies (Amendment) Act,2015 received the assent of the President on May 25, 2015. The Act, which is an amendment to the Companies Act, 2013, seeks to make it easier to do business and provides for stricter penalties for cases involving fraudulent transactions. The main objective of this Amendment Act is to promote the development of the economy by encouraging entrepreneurship and enterprise efficiency and creating flexibility and simplicity in the formation and maintenance of companies.
The amendments, which were passed by parliament earlier this month, have been made to the Companies Amendment Act 2013 mainly to deal with provisions relating to board resolutions, utilisation of unclaimed dividend, setting up of a firm among others as well to bring the law in tune with the global standards.
- For setting up of private company, the new act has been done away with the norms of Rs 1 lakh minimum capital requirements and Rs 5 lakh in case of public companies.
- The concept of the common seal has also been done away with. GST India
- If the firm fails to repay the deposits or any interest due thereon within the time specified, it will be punishable with a fine which shall not be less than 1 crore but which may extend to 10 crores in addition to the payment of deposits.
- Every officer of the company who is in default shall be punishable with imprisonment, which may extend to 7 years or with a fine which shall not be less than 25 lakhs but which may extend to 2crores or both.
- In case of dividend, the amendment act said that no company will declare dividend unless “carried over previous losses and depreciation not provided in the previous year or years are set off against the profit of the company for the current year.
- The unclaimed dividend will not be transferred to the investor and protection fund.
- With regard to trying fraud cases, the new norms say that all cases under the Companies Act cannot be tried by a special court and that only serious offences will go to such court while the others would be tried by a normal magisterial court.
- If an auditor of a company in course of performance of his duties as auditor has reason to believe that an offence of fraud involving such amount has been committed in the company by its officers or employees the auditor shall report the matter to the central government. In case of a fraud involving the lesser than the specified amount, the auditor shall report the matter to the audit committee.
- Besides issue concerning the related party transactions with regard to company and wholly owned subsidiary too havebeenaddressed through the amendment.
- The audit committee can make omnibus approval for related party transactions proposed to be entered by the company in case of any loan made by holding the company to its wholly owned subsidiary or any guarantee given by holding the company to its wholly owned subsidiary in respect of any loan.
Currently, related party transactions can be passed through ordinary resolution instead of a special resolution. Hence, the main purpose of the Companies Amendment Act 2015 can be summarised as follows:-
- To cater to the need for more effective and time-bound approvals and compliance requirements relevant in the present context.
- To encourage transparency, accountability and high standards of corporate governance.
- To recognise various new concepts and procedures facilitating ease of doing business while protecting the interests of all stakeholders.
To set up an institutional structure in the form of various authorities, bodies and panels as well as by including recognition of various roles for professionals and experts.