Update on Companies Act, 2013

Companies (Meetings of Board and its Powers) Second Amendment Rules, 2017

Companies (Appointment and Qualification of Directors) Amendment Rules, 2017

                                                             And

Amendment in Schedule IV of the Companies Act, 2013

COMPANIES (MEETINGS OF BOARD AND ITS POWERS) SECOND AMENDMENT RULES, 2017:

Ministry of Corporate Affairs vide Notification dated July 13, 2017 has notified Companies (Meetings of Board and its Powers) Second Amendment Rules, 2017 (“the amendment Rules”). The important changes brought by the Rules are as follows:-

  1. New clause (e) has been inserted in sub-rule (3), which states that:-

Any director who intends to participate in the meeting through electronic mode may intimate about such participation at the beginning of the calendar year and such declaration shall be valid for one year:

Provided that such declaration shall not debar him from participation in the meeting in person in which case he shall intimate the company sufficiently in advance of his intention to participate in person.

Explanation:- Amendment Rule enables any Director of the Company to give prior intimation with respect to his attendance in the Meeting through electronic mode, the amendment Rules do not debar him from attending Meeting personally if the Director intimates to Company in advance.

  1. Addition in sub-rule (11) clause (a):-

Sub-rule (11) clause (a) states that- At the end of discussion on each agenda item, the chairperson of the Meeting shall announce the summary of the decision taken on such item along with names of Directors, if any, who dissented from the decision taken by majority and the draft minutes so recorded shall be preserved by the company till the confirmation of the draft minutes in accordance with sub-rule (12). 

            Explanation:- The portion highlighted in bold letters is added pursuant to the amendment rules.

  1. New Rule (6) has been inserted pursuant to the amendment rule which states that:

The Board of directors of every listed company and a company covered under rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014 shall constitute an ‘Audit Committee’ and a ‘Nomination and Remuneration Committee of the Board.

Explanation:- Rule 4 of Companies (Appointment and Qualification of Directors) Rules, 2014 consists certain criteria, which are as follows:- 

  • The public companies having paid-up share capital of ten crore rupees or more;
  • The Public Companies having turnover of one hundred crore rupees or more;
  • The Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding fifty crore rupees.

COMPANIES (APPOINTMENT AND QUALIFICATION OF DIRECTORS) AMENDMENT RULES, 2017:-

Ministry of Corporate Affairs vide Notification dated July 05, 2017 has notified Companies (Appointment and Qualification of Directors) Amendment Rules, 2017 (“the amendment Rules”). The important changes brought by the Rules are as follows:-

  1. Rule 4 of Companies (Appointment and Qualification of Directors) Rules, 2014 provides for Number of Independent Directors and Class of Companies who are required to appoint Independent Director. The Criteria under Rule 4 is as follows:-
  1. The public companies having paid-up share capital of ten crore rupees or more;
  2. The Public Companies having turnover of one hundred crore rupees or more;
  • The Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding fifty crore rupees.

The amendment Rule provides exemptions to certain class of unlisted public companies which are as follows:-

  1. a joint venture;
  2. a wholly owned subsidiary;
  • a dormant company defined under section 455 of the Companies Act, 2013.

AMENDMENT IN SCHEDULE IV OF THE COMPANIES ACT, 2013

Ministry of Corporate Affairs vide Notification dated July 05, 2017 has amended Schedule IV of the Companies Act, 2013. The Important amendment in the Schedule IV are as follows:-

  1. Previously Paragraph VI, sub-para (2)  of Schedule IV states that an Independent Director who resigns or is removed from the Board of the Company shall be replaced by a new Independent Director within a period of not more than one hundred and eighty daysfrom the date of such resignation or removal, as the case may be. As per the Amendment notification for the words a period of not more than one hundred and eighty days the words “three months” shall be substituted.
  1. Previously Paragraph VII sub-para(1) of Schedule IV states that the Independent Directors of the Company shall hold at least one meeting in a year, without the attendance of  non-independent directors and members of the Management. As per the Amendment notification for the words “in a year” the words “in a financial year”shall be substituted.

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