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India – Corporate And SCRA Update.

9 February, 2015

 


  • By way of a press note dated December 2, 2014, the MCA has announced that the Union Cabinet has approved the introduction of the Companies (Amendment) Bill, 2014 (‘Bill’) in the Parliament to make certain amendments to the Companies Act, 2013 (‘Act’). The Lok Sabha has approved the Bill as of December 17, 2014. Below is a brief overview of certain amendments proposed to be made by the Bill:

Sl No Sections of the Act Particulars of Provision Proposed Amendment
1 Section 2 (68), Section 2 (71) and Section 11 Definitions of Private Company and Public Company Omits the requirement for minimum paid up share capital and consequential changes.
2 Sections 9, 12, 22, 46 and 223 Sections pertaining to use of the common seal for execution of bills of exchange and issue of share certificates Makes the common seal optional and consequential changes for authorisation of documents.
3 New Section 76A to be added Section pertaining to acceptance of deposits by companies Prescribes a specific punishment for deposits accepted in contravention of the Companies Act, 2013.
4 Section 117(3)(g) Board Resolutions filed with the Registrar of Companies To prohibit public inspections of board resolutions filed with the Registrar of Companies.
5 Section 123(1) Sections pertaining to declaration of dividend. Includes provision for writing off past losses/ depreciation before declaring dividend. This was earlier in the rules.
6 Section 124(6) Provisions pertaining to transfer of equity shares to the Investor Education and Protection Fund (‘IEPF’) Clarifies that only the equity shares for which dividend has not been claimed/paid for 7 consecutive years will be required to be transferred to the IEPF, and this requirement will not have to be met if dividend is paid or claimed in respect of such shares for any year during such period of 7 years.
7 Section 134 (3) and Section 143 (12) Provisions pertaining to fraud Includes enabling provisions to prescribe thresholds beyond which fraud will be reported to the Central Government.
8 Section 185 Provisions pertaining to loans to directors Includes exemption for loans to wholly owned subsidiaries and guarantees/securities on loans taken from banks by subsidiaries.
9 Section 177(4)(iv) Provisions pertaining to the audit committee Empowers the audit committee to give omnibus approvals for related party transactions on an annual basis
10 Section 188(1) Provisions pertaining to related party transactions. Replaces ‘special resolution’ with ordinary resolution for approval of related party transactions by non – related shareholders.
11 Section 188(1) Provisions pertaining to related party transactions Exempts related party transactions between holding companies and wholly owned subsidiaries from the requirement of approval of non – related shareholders.
12 Section 212(6) Provisions pertaining to bail Makes bail restrictions applicable only for offences relating to fraud.
13 Section 419(4) Provisions pertaining to winding up proceedings Provides for winding up cases to be heard by a 2 member bench instead of a 3 member bench.
14 Sections 435 and 436 Special courts Provides that special courts will try only offences carrying imprisonment of 2 years or more and the magistrate will try minor violations.

 

  • Clarifications were sought from the Ministry of Corporate Affairs (‘MCA’) as to whether a trust or a trustee representing a trust with respect to either a Real Estate Investment Trust or an Infrastructure Investment Trust or any other such trust set up under the regulations prescribed under the Securities & Exchange Board of India Act, 1992, can become a partner in a limited liability partnership (‘LLP’).

The MCA has, by way of General Circular No. 37 of 2014 (‘Circular’) dated October 14, 2014, clarified in respect of such trusts that it is permissible for a trustee, which is a body corporate, to be a partner in an LLP in its name without the addition of the statement that it is a trustee.

  • Various stakeholders have made references to the MCA seeking clarifications on applicability of the provisions of Chapter III of the Act (Prospectus and Allotment of Securities) to the issue of Foreign Currency Convertible Bonds (‘FCCBs’) and Foreign Currency Bonds (‘FCBs’) by Indian companies exclusively to persons resident outside India in accordance with the applicable regulatory requirements.

The MCA has clarified by way of General Circular No. 43 dated November 13, 2014 that since the issue of FCCBs and FCBs by companies is regulated by the Ministry of Finance’s regulations contained in the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipts Mechanism) Scheme, 1993 (‘Scheme’) and the Reserve Bank of India (‘RBI’), unless otherwise provided in the Scheme or the directions / regulations issued by RBI, provisions of Chapter III of the Act will not apply to issuance of FCCBs and FCBs made exclusively to persons resident outside India in accordance with the above mentioned regulations.

AZB 

For further information, please contact:

 

Zia Mody, AZB & Partners
zia.mody@azbpartners.com

 

Abhijit Joshi, AZB & Partners 
abhijit.joshi@azbpartners.com

Shuva Mandal, AZB & Partners 
shuva.mandal@azbpartners.com

 

Samir Gandhi, AZB & Partners
samir.gandhi@azbpartners.com

Percy Billimoria, AZB & Partners 
percy.billimoria@azbpartners.com

 

Aditya Bhat, AZB & Partners 
aditya.bhat@azbpartners.com

 

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