On 3 January 2018, the Companies (Amendment) Act, 2017 (“The Act”) received the assent of the President of India and subsequently published in the Official Gazette of India. The Act has made significant changes to the Companies Act, 2013 with the aims to simplify procedures, strengthen corporate governance standards against defaulting companies and facilitate ease of doing business in India.
Companies within Scope
- All companies incorporated in India
- A foreign company with not less than 50 percent share capital that is held by
- one or more citizens of India or
- one or more companies/body corporates incorporated in India
How it could affect you
Some changes are highlighted below:
Effect on company incorporation
Reservation of a company name is extended to 20 days from the date of approval (earlier 60 days from the date of application) for the new company. Additionally, it allows a company to establish a registered office within 30 days (earlier within 15 days) from the date of its incorporation.
New section 3A – members to be severally liable for payment of whole debts of company
If the number of members reduced below the requirement of 7 for a Public company and 2 for a Private company, while the company carries on business for more than 6 months with members within being aware of the default, then every member shall be severally liable for payment of the whole debt of the company contracted during that time, and may be severally sued therefor.
Issuance of shares on private placement
The Act simplifies the private placement process and could only be made to a select group of persons identified by the Board of Directors
Issuance of shares at discount
The Act allows companies to issue shares at discount to its creditors when its debt is converted into shares in pursuance of any statutory resolution plan or debt restructuring scheme in accordance with the guidelines and regulations specified by Reserve Bank of India
Maintenance of register of significant beneficial owners
Register of beneficial owners should be maintained by each company and filed with the Registrar. Failure to comply with the new requirements and obligations shall The company and every responsible person of the company are subject to a fine of not less than Rs 1,000,000 but which may extend to Rs 5,000,000 and a further daily fine of Rs 1,000.
You may click here for our previous Vistra India Update published in January.
For further amendment details, please refer to the Companies (Amendment) Act, 2017.
How Vistra can support
Vistra is able to advise on the changes emanating from the amendments. Please do not hesitate to contact us or your account manager should you have further queries.