The Government of India (GOI) had received several representations from industry stakeholders

for amending various provisions of Companies Act, 2013 (CA 2013) to ensure ease of doing
business in India. Towards this, the Companies (Amendment) Act, 2015 (CA Amendment 2015)
received the assent from the President of India on 25 May 2015 after both the houses of the
Parliament approved the CA Amendment 2015. The CA Amendment 2015 has been published
in the Official Gazette on 26 May 2015 and is a welcome step towards addressing some of the
concerns under CA 2013, though there are several other concerns which are yet to be
addressed by the GOI.
The Central Government is authorised to appoint different dates for implementation of different
provisions in the CA Amendment 2015. Accordingly, while most provisions have become
effective from 29 May 2015, certain amendments are yet to be notified (as specifically
mentioned below).
Further, on 29 May 2015, in order to align CA 2013 and the rules thereunder with the CA
Amendment 2015, the Ministry of Corporate Affairs (MCA) has also issued amendments to
relevant Rules under CA 2013 (namely, the Companies (Share Capital and Debenture) Second
Amendment Rules, 2015, the Companies (Declaration and Payment of Dividend) Secondment
Amendment Rules, 2015, the Companies (Incorporation) Second Amendment Rules, 2015, the
Companies (Registration of Charges) Amendment Rules, 2015 and Companies (Registration
Offices and Fees) Second Amendment Rules, 2015), however, these amendments to the rules
are yet to be notified in the Official Gazette.
Some of the key amendments and clarifications in the CA Amendment 2015 are as follows:

No Minimum Paid-up Share Capital: The minimum paid-up share capital requirement
of INR 100,000 (in case of a private company) and INR 500,000 (in case of a public
company) under CA 2013 has been done away with. Consequently, the definitions of
private and public companies stand amended.
Accordingly, no minimum paid-up capital requirements will now apply for incorporating
private as well as public companies in India.
Relaxations vis-a-vis Related Party Transactions:
o

Section 188 of CA 2013 lists out such related party transactions, which require
approval from the board of directors and/or the shareholders, as prescribed. If
such related party transactions meet the thresholds prescribed in CA 2013 and
the rules thereunder, approval from the shareholders by way of passing of a
special resolution (i.e. requiring approval of three-fourth majority of shareholders)
was required.
The CA Amendment 2015 has relaxed the approval requirement from a special
resolution (i.e. requiring approval of three-fourth majority of shareholders) to an
ordinary resolution (i.e. requiring approval of simple majority of shareholders) in
case of related party transactions which require shareholders' approval.

Further, Section 188 and the rules thereunder provided that in case of related
party transactions between a holding company and its wholly owned subsidiary, a
special resolution passed by the holding company was sufficient.

The CA Amendment 2015 has relaxed and done away with the requirement of a
special resolution in the above cases provided the accounts of the wholly
owned subsidiary are consolidated with the accounts of the holding company,
and placed before the shareholders at a general meeting for approval.
o

In order to align with Clause 49 of the Listing Agreement, Section 177 has been
amended to include a proviso to enable the concerned audit committee to
provide omnibus approval for related party transactions subject to prescribed
conditions.
The above amendment to Section 177 has not been notified as yet.

Inspection of Resolutions, etc. filed with the Registrar: Earlier, under Section 117
read with Section 399 of CA 2013, certain resolutions (e.g. all special resolutions,
resolutions for terms of appointment of managing director, winding-up resolutions,
resolutions in relation to sale of undertaking / borrowings, etc.) filed by a company with
the Registrar of Companies were open for inspection by any person or to obtain copies.
The CA Amendment 2015 has limited public access of such resolutions relating mainly
to strategic business matters. Such documents will no longer be available for public
review or permitted to take copies of. This addresses the concerns raised by several
corporates in India, specifically private companies, in terms of exposure of critical
business matters in public.

Common Seal Optional: CA 2013 required common seal to be affixed on certain

documents (such as bill of exchange, share certificates, etc.) Now, the use of common
seal has been made optional. All such documents which required affixing the common
seal may now instead be signed by two directors or one director and a company
secretary of the company.
Consequently, several sections of CA 2013 dealing with common seal have been
amended to incorporate the above requirement.

No declarations for commencement of business, etc.: CA 2013 required all

companies to file following additional declarations with the Registrar of Companies prior
to commencement of business or exercising any borrowing power: (i) declaration by a
director that minimum paid-up share capital has been paid; and (ii) company has filed
verification of registered office.
The CA Amendment 2015 has removed the above requirements and deleted Section 11
of CA 2013. This reduces the filings to be made by companies in India.

Violation of Acceptance of Deposits, etc.: CA 2013 introduced stringent provisions in

relation to acceptance/ renewal / repayment of deposits. However, no specific penalty
was prescribed for non-compliance with the relevant provisions i.e. Section 73 and
Section 76. This lacuna has been filled by the CA Amendment 2015.
A new Section 76 A has been introduced for the above non-compliances. The defaulting
company will be liable for fine of a minimum amount of INR 10,000,000 and a maximum
of INR 100,000,000 in addition to the amount of deposit or part thereof, along with
interest. Further, every officer of the company in default is punishable with imprisonment

which may extend upto 7 years or with a fine amounting to a minimum of INR 2,500,000
and maximum of INR 20,000,000 or both. Such officer may attract additional penalty for
fraud under CA 2013 if the non-compliance was done knowingly or with the intention to
deceive the company, shareholders, depositors, creditors or tax authorities.

Reporting by Auditors in respect of Fraud: CA 2013 introduced the reporting

obligations on auditors of companies to the Central Government if the auditor has
reason to believe that a fraud has been committed by officers or employees of the
company, irrespective of the amounts involved. The CA Amendment 2015 has provided
that thresholds will be prescribed for reporting of frauds to the Central Government, or
the audit committee or the board of directors. All such instances of frauds falling below
prescribed thresholds will be reported to the board or the audit committee and will need
to be disclosed in the annual report of the company, instead of mandatory reporting to
the Central Government.
The above amendment eases the administrative burden for the auditors, however, these
amendments have not been notified as yet.

Exemptions to Section 185: Section 185 includes restrictions on loans by a company

to a director or other interested persons / entities. However, the rules prescribed under
Section 185 exempted any loans / guarantee / security by a holding company to its
wholly owned subsidiary, and any guarantee or security by a holding company to a
financial institution for loan availed by its subsidiary, provided the loan in each of these
cases is utilised by the subsidiary for its principal business.
The above provisions of the Rules have now been inserted under Section 185 of CA
2015 itself.

Dividend: Section 123 is an enabling provision for companies to declare divided in a

financial year, subject to fulfilment of prescribed conditions. The CA Amendment 2015
has introduced a new proviso which states that a company cannot declare dividend for a
financial year, unless the losses and depreciation carried over from past years have
been set-off against the profits of the company, in the year it proposes to declare a
dividend.

Special Courts: Section 435 read with Section 436 provides the Central Government
the power to set up special courts to try offences under CA 2013.
By way of the above amendment, special courts may now only try offences punishable
under CA 2013, with imprisonment for 2 years or more. All other offences are to be tried
by a Metropolitan Magistrate or a Judicial Magistrate of the First Class.