Parliament on 19 December 2017 passed the Companies (Amendment) Bill 2017 with as many as 40 amendments in the Companies Act 2013 to safeguard the interest of shareholders, strengthen corporate governance standards and improve the ease of doing business.
Among other things, the amended law removes the restrictions on number of layers of investment companies, it also removes the restrictions on number of layers of subsidiaries of a company.
- It allows independent directors to have pecuniary interest in the company to up to 10% of their income. The amount may be modified by the central government as opposed to the Companies Act of 2013, which debarred the independent directors from having monetary relationship with the company.
- The bill was introduced in the Lok Sabha in March 2016, and then referred to the Standing Committee on Finance. After taking into consideration the recommendations of the panel, the Cabinet had cleared a revised bill in March this year.
- The members raised apprehensions that the government was not doing enough to ensure that the companies comply with corporate social responsibility provisions.
- Former finance minister P Chidambaram opposed the amendment to delete Section 195 and 196 that provide for prohibition of insider and forward trading.
- Chidambaram also sought separate law for small and medium companies. He said the bill had noble objectives to benefit the medium and small companies but relaxations given to such companies under this legislation will be applicable to large companies as well since there was only one Companies Act.
- Certain changes proposed by the Company Law Committee in relation to residence requirement of directors were not included in the bill. This implies that the provision under the 2013 Act that requires a person to be a resident of India for being eligible to be appointment as a whole -time director of a company, stays in the new bill.
- A resident is defined as someone who has stayed in India for a continuous period of 12 months before he is appointed as a director.