Highlights of Companies Amendment Act 2015

The Indian Government is actively working to improve ease of doing business in India. A key initiative in this aspect is the Amendment to Companies Act, 2015 to make it more business or investor-friendly. The Companies Amendment Bill, 2015 was passed in Lok Sabha on 17/12/2014 and it was passed in the Rajya Sabha in 13/5/2015. The Companies Amendment Bill got the Presidents to assent on 25/5/2015 and was published in the Official Gazette of India on 26/05/2015 as the Companies Amendment Act 2015. In this article, we look at important highlights of the Companies Amendment Act, 2015.

No Minimum Paid-Up Capital

The Companies Act, 2013 defied a Private Limited Company as: “private company” means a company having a minimum paid-up share capital of one lakh rupees or such higher paid-up share capital as may be prescribed".

This effectively meant that every private limited company in India must have a minimum paid-up capital (invested funds) of one lakh rupees irrespective of the authorized capital. Know more about the concept of authorized capital and paid-up capital.

The Companies Amendment Act, 2015 removes the words “of one lakh rupees or such higher paid-up share capital” relating to Private Limited Company thereby necessitating NO minimum capital requirement for starting a private limited company. The words “of five lakh rupees or such higher paid-up capital,” has also been removed wherein it pertains to the minimum paid-up share capital of a Limited Company. Hence, a public limited company can also be started without a minimum capital of rupees five lakhs.

No Requirement for Commencement of Business Certificate

The Companies Act, 2013 introduced the concept of Commencement of Business Certificate for Private Limited Company. Obtain the Commencement of Business Certificate after incorporation and before commencing business by filing a declaration with the Registrar. The declaration for Commencement of Business Certificate states that every subscriber to the MOA has paid the value of the shares agreed to take by him and the paid-up share capital of the company is not less than five lakh rupees in case of a public company and not less than one lakh rupees in case of a private company.

The Companies Amendment Act, 2015, the requirement of obtaining Commencement of Business Certificate post-incorporation.

Common Seal is Optional

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Company Common Seal

In Companies Act, 2013, it requires a common seal for a Company to provide various authorizations and attestations on behalf of the Company. The requirement for a common seal has now been made optional and the Director's signature is acceptable in lieu of the common seal of the Company.

Stringent Penalty for Company Inviting or Accepting Deposit

The Companies Act, 2013 was silent with respect to the penalty or fine for Companies inviting or accepting deposits from Public without approval from the Regulatory Authorities. The Companies Amendment Act, 2015 has introduced a stringent penalty for Directors of Companies that invite or accept or renew deposits contravening to the Companies Act, 2013.

Through the Companies Amendment Act, 2015, the following sections have been added to the Companies Act, 2013 prescribing penalty for inviting or accepting or renewing public deposit:

"Where a company accepts or invites or allows or causes any other person to accept or invite on its behalf any deposit in contravention of the manner or the conditions prescribed under section 73 or section 76 or rules made thereunder or if a company fails to repay the deposit or part thereof or any interest due thereon within the time specified under section 73 or section 76 or rules made thereunder or such further time as may be allowed by the Tribunal under section 73,
1. the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less than one crore rupees but which may extend to ten crore rupees; and
2. every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees, or with both:
Provided that if it is proved that the officer of the company who is in default, has contravened such provisions knowingly or wilfully with the intention to deceive the company or its shareholders or depositors or creditors or tax authorities, he shall be liable for action under section 447.”

Board Resolutions are Confidential

A person must file the so far Board Resolutions under the Company with the Ministry of Corporate Affairs. The Board Resolutions were public documents and can download by paying a fee. However, to protect company confidentiality, the clause "provided that no person shall be entitled under section 399 to inspect or obtain copies of such resolutions" has been inserted. Therefore, board resolutions now cannot be accessed publicly.

Dividend Cannot Be Declared by Company Having Losses

The Companies Amendment Act, 2015 has inserted the section “Provided also that no company shall declare dividend unless carried over previous losses and depreciation not provided in previous year or years are set off against profit of the company for the current year”. Hence, companies having losses or negative reserves cannot declare dividends.

Loan can be Provided by Holding Company to Subsidiary Company

Loans or guarantees can be provided by the holding company to the subsidiary company. Though the Companies Act, 2013 did not have any restrictions on holding company providing loan to a subsidiary company, the new Companies Amendment Act, 2015 has clarified the same in abundance of caution.

The above items are some of the major highlights of the Companies Amendment Act, 2015. The entire list of changes to the Companies Act, 2014 can be downloaded here.