The much-awaited
Companies (Amendment) Act, 2017 (Amendment Act) was ratified by the President
and came into force on January 03, 2018. This Amendment Act has crafted some
significant modifications to the existing Companies Act, 2013.

The
underlying intent of the Amendment Act is to reduce certain procedural
requirements and relaxing certain norms with the intent to encourage investors
to capitalize the advantages offered by Indian capital markets and further
strengthening the ease of doing business sentiment in India.

Gist
of the key amendments made to the Companies Act, 2013 is as follows:

·       Private
placement process has been simplified with substantial decline in the filing
documentation with the Registrar of Companies and releasing a company from the
obligation to maintain separate offer letter details.

·       It
has been made mandatory for companies to make adequate disclosures in private
placement application form (under the explanatory statement) to ensure that the
investors will have abundant acquaintance with the company existing financial
state of affairs.

·       Central
government has been empowered to exempt certain classes of foreign companies
from complying with specified provisions of the Companies Act, 2013.

·       Companies
are eligible to grant loans to entities in which directors of such company has
interest provided such decision to grant loans is approved through special
resolution in general meeting and company strictly complies with the applicable
requirements.

·       Issue
of shares at discount to the creditors by the company is endorsed when its debt
is converted into shares in carrying out of any statutory resolution plan or
debt restructuring scheme.

·       Any
member (related party) of a company can cast its vote for approving any related
party contract or arrangement provided that 90% or more members of the company
are relatives of promoters or related parties.

·       Voting
rights are included in the definition of “Significant Influence” to broaden the
gauge in defining the “Associate Company” to the advantage of investors
subscribed through preference shares route.

·       Certain
remuneration to independent director or other director is excluded from the
ambit of pecuniary relationship.

·       Joint
Venture is defined as joint arrangement made by the parties that have joint
control of the arrangement and rights to the net assets of the arrangement.

·      Removal
of the obligation to get approval of the Central Government for Managerial
remuneration above prescribed limits and is to be replaced by approval through
special resolution by shareholders in general meeting.

·      Provisions
with respect to insider trading/forward dealing are deleted.

·      It
is mandated on companies to maintain a register of significant beneficial
owners by a company and filing of all related returns to the Registrar.

·       Every
company (not obligated to appoint independent director) is commanded to appoint
two or more directors in its Corporate Social Responsibility committee.

Government
needs to be aware of few amendments which may have negative impact on the
capital markets as there is great risk of these amendments promoting the
conduct of prohibited trade related activities and can prove to be
counterproductive and disastrous.

In
order to deal effectively with the potential dangers associated with such
amendments, the government and SEBI are obligated to swiftly take corrective
action and issue necessary amendments in the relevant regulations, if need be.

Despite
few hiccups in the amendments, it is evident from the most of the amendments
are tailor-made to ensure the ease of doing business sentiment in India. 

Research
and inputs by Paruchuri Baswanth Mohan.

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About the author :

Bhumesh Verma is a
Corporate Lawyer with over 2 decades of experience in advising domestic and
international clients, with a place in “The A-List – India’s Top 100
Lawyers” by India Business Law Journal. He keeps writing frequently on
FDI, M&A and other corporate matters. He can be reached at
[email protected].