The companies (Amendment) Bill, 2014 — which seeks to amend the reportedly cumbersome Companies Act of 2013 to facilitate the ease of doing business — was approved by the Rajya Sabha on Wednesday.
Sixteen amendments may not be enough to make the Act simpler, said Finance Minister Arun Jaitley, adding that a committee would look into this aspect over the next few months to see where the “shoe pinches”.
Replying to a discussion on the bill, he said the government could bring in more amendments. A committee with representatives of bodies of company secretaries, chartered accountants, industry chambers and officials will suggest changes, he said.
There had been drafting oversights in the 2013 Act, said Jaitley, adding that the government had revisited “provisions of onerous nature” to bring them in line with global standards. “People were finding it extremely difficult to comply with all provisions” and were finding it easier to opt for limited liability partnerships rather than incorporating companies, Jaitley said.
The 16 amendments to the Act pertain to removing minimum mandatory capital for starting a company, doing away with common company seal, inspection of records of companies, winding up of companies, simplifying stringent bail provisions, and utilisation of unclaimed dividends.
Jaitley said the provisions of mandatory capital and company seal were “globally obsolete’’ and they had become “archaic’’.
On the stringent bail provisions for violations under the Act, he said except in very serious cases of fraud, normal CrPC provisions would apply. Only serious offences would be dealt with by special courts, while minor ones would be dealt with in magistrate courts, he added. A minimum limit was also being set for fraud cases that would be reported to the Centre.
While the 2013 Act dictated that in case of winding up companies, the matter should be referred to a three-judge bench, Jaitley said he was doing away with it. The earlier Act did not specify punishment provisions for violation of prohibition on accepting deposits, and this was being rectified, he said.
About the provision for inspection of company records, Jaitley said the 2013 Act did not differentiate between Annual General Meeting resolutions, meant for public display, and resolutions by the company’s board which “may contain the entire corporate strategy, financial strategy or intellectual property of a company.” This too was being corrected, he said.
He added that a provision for setting off past losses and depreciation before declaring dividends was incorporated among the rules without being put in the Act, and this gap in drafting was being rectified. He also said he was addressing issues concerning related party transactions resulting in “rule by minority” in companies where relatives and spouses are directors. With regard to voting in such cases, Jaitley said he was diluting the voting provision to an ordinary resolution.