Lok Sabha passes bill to amend companies law

NEW DELHI: The Lok Sabha on Thursday passed the Companies Act (Amendment) Bill, 2016 that seeks to make significant changes to the 2013 law to remove complexities and improve ease of doing business, strengthen corporate governance standards and prescribes strict action against defaulting companies.

The bill was passed with a voice vote, with over 40 amendments moved by Arjun Ram Meghwal, minister of state for finance and corporate affairs.

The bill will now go to the Rajya Sabha. The bill has been brought to improve ease of doing business, Meghwal said.

He said the National Spot Exchange Ltd and PACL scams were legacy issues the government was trying to resolve. It will proceed against companies not complying with corporate social responsibility standards, he added.


Meghwal also allayed concerns raised by some members that the amendments will dilute the objectives of the 2013 law.

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 proposes to ease the compliance burden for unlisted companies. They can hold annual general meetings in places other than the registered office as well.

The bill seeks to harmonise insider trading rules with those of stock market watchdog Sebi. Companies with common directors will be allowed to give loans to each other, another measure flagged as a concern in the 2013 law.

“The proposed changes are broadly aimed at addressing difficulties in implementation owing to stringency of compliance requirements; facilitating ease of doing business in order to promote growth with employment; harmonisation with accounting standards,” finance minister Arun Jaitley said in the statement of objects of the bill.

The bill went through a committee of experts and thereafter was vetted by the standing committee on finance.

It proposes to make incorporation of companies easier by allowing self-declarations instead of affidavits from subscribers to memorandum and first directors.

Equity share capital will be the deciding consideration for establishing associate and subsidiary companies, and not both equity and preference share capital as provided now. Penal provisions have been moderated to provide for lower penalty for procedural defaults and on one person companies and small companies.