The Lok Sabha on 27th July, 2017, passed the Companies (Amendment) Bill, 2016, which was introduced in March 2016. The Bill will now go to the Rajya Sabha.

The Bill amends more than 40 provisions of the Companies Act, 2013 moved by Arjun Ram Meghwal, Minister of State for Finance and Corporate Affairs. The Bill was introduced based on the suggestions received from various stakeholders on the Companies Law Committee Report, which was published in February 2016 suggesting certain reforms to the Act to remove complexities and improve ease of doing business, strengthen corporate governance standards and prescribes strict action against defaulting companies.


The Bill simplifies the private placement process under Section 42, which currently prohibits an issue while an older one is pending, thus allowing companies to keep more than one issue of security open by simultaneously offering different kind of securities.

The amendments raise the threshold for the easy compliance scheme to Rs 100 crore from Rs 20 crore, making more companies eligible for the simple compliance regime. The Bill seeks also to ease rules for private placement of securities and fix an eight-year limit on reopening of past accounts against no limit in the earlier regime.

It further removes restrictions on layers of subsidiaries and investment companies which is currently limited to two.

Another interesting feature is that the Bill allows unrestricted object clause in the Memorandum of Association dispensing with ‘detailed listing of objects, self-declarations to replace affidavits from subscribers to memorandum and first directors’. While this amendment will allow operational freedom to companies, on the flip side, it may be detrimental to the interests of investors and creditors since the object clause defined and indicated the scope and extent of the main business activity of a company.

Another important change is the replacing of Central Government approval under Section 197(1) of the Act with special resolution approval of shareholders in case the managerial remuneration crosses the prescribed thresholds.

Provisions relating to forward dealing and insider trading from the Act have also been omitted, since they only apply to listed entities which are already covered under regulations promulgated by SEBI.

Taruna Verma

Senior Associate

The Indian Lawyer

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