KEY HIGHLIGHTS OF COMPANIES (AMENDMENT) BILL, 2017

• Loans to Directors

Under the Companies Act, 2013, companies are not allowed to advance any loan etc. to its

directors or persons related to the Director. The Companies (Amendment) Bill, 2017 has

proposed to relax this restriction and allow companies to extend loan etc. to its Directors or

related persons, after passing a special resolution.

To prevent abuse of this relaxation, an additional clause has also been introduced in the

Companies (Amendment) Bill, 2017 to punish Directors who use loans against conditions

under which it was extended.

• Related Party Definition

Under the Companies Act, 2013, a ‘related party’ in relation to a company includes:

A holding, subsidiary or an associate company of such company; or

A subsidiary of a holding company to which it is also a subsidiary.

The Companies (Amendment) Bill, 2017 has proposed to make an investing company or the

venture of a company a related party as well.

• Annual Return of Companies

All companies are required to file an annual return with the Ministry of Corporate Affairs

each year. The Companies (Amendment) Bill, 2017 has proposed to provide an abridged

form of annual return for One Person Company and small company. The abridged form of

annual return will make annual compliance for a company simpler for small businesses.

The Companies (Amendment) Bill, 2017 has also mandated that all companies place a copy

of the annual return on the website of the company and provide the web link for the annual

report in the Board’s report.

• Private Placement

Though the entire section is proposed to be substituted but major changes proposed are:

1. Return of allotment has to be filed within 15 days instead of 30 days.

2. Money received under the private placement shall not be utilized unless the return of

allotment is filed with the ROC.

3. Private Placement offer letter shall not contain any right of renunciation.

• Corporate Social Responsibility

Eligibility criteria for the purpose of constituting the corporate social responsibility

committee and incurring expenditure towards CSR is proposed to be calculated based on

immediately preceding financial year. Currently this eligibility is decided based on preceding

three financial years.

• Signing of financial statements

The provisions of section 134 require that, amongst others, the financial statement shall be

signed by the Chief Executive Officer, if he is a director in the company. The amendment

proposes that the Chief Executive Officer shall sign the financial statements irrespective of

whether he is a director or not because Chief Executive Officer is a Key managerial

Personnel, and responsible for the overall management of the company. Further, since the

appointment of a managing director is not mandatory for all companies, it is proposed to

insert the words “if any”, after the words “managing director”.