Key Amendments to various Rules under Companies Act, 2013
The Ministry of Corporate Affairs (“MCA”) has amended various rules under the Companies Act, 2013, inter alia, in relation to management and administration of company, meetings and powers of board of directors of company, prospectus and allotment of securities by the company, and shares and debentures issued by the company. Some of the notable amendments are as follows.
- The Companies (Share Capital and Debentures) Amendment Rules, 2018 dated April 10, 2018
Under the erstwhile Rule 5 of the Companies (Share Capital and Debentures) Rules, 2014, every share certificate was required to be issued under the seal, if any, of the company, in the presence of, and signed by 2 (Two) directors authorized by the board or committee of the company and the secretary or any person authorised by the board. Where the company did not have a common seal, the share certificate was required to be signed by 2 (Two) directors or by a director and the company secretary, wherever the company had appointed a company secretary.
Pursuant to the amendment, every share certificate is required to specify the shares to which it relates and the amount paid-up thereon and is required to be signed by 2 (Two) directors or by a director and the company secretary, wherever the company has appointed a company secretary. However, where the company has a common seal, it is required to be affixed in the presence of persons required to sign the certificate.
- The Companies (Meetings of Board and its Powers) Amendment Rules, 2018 dated May 07, 2018
- Under the erstwhile Rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 (“Rules”), certain matters like approval of annual financial statements, approval of board’s report etc. could not be dealt with in any meeting held through video conferencing or other audio-visual means. The amendment allows directors to participate in such meetings through video conferencing or other audio-visual means if there is a quorum present in such meeting through physical presence of directors.
- Every listed public company is required to constitute an Audit Committee and a Nomination and Remuneration Committee pursuant to the amendment.
- The requirement of passing a special resolution under Section 186 of the Companies Act, 2013, dealing with loans given and investment made by the Company read with Rule 13 of the Rules within 1 (One) year from the date of notification of the Section has been done away with.
- The Companies (Prospectus and Allotment of Securities) Amendment Rules, 2018 dated May 07, 2018
MCA, vide amendment to the Companies (Prospectus and Allotment of Securities) Rules, 2014, has removed rules 3, 4, 5, and 6. The omitted rules dealt with information to be stated in the prospectus, reports to be set out in the prospectus, other matters and reports which are to be set out in the prospectus and the period for which the above-mentioned information was required to be provided.
- The Companies Share Capital and Debentures (Second Amendment) Rules, 2018 dated May 07, 2018;
As per Rule 8 of the Companies (Share Capital and Debentures) Rules, 2014 (“Rules”), a company other than a listed company, which is not required to comply with the SEBI Regulations on sweat equity shares, was not allowed to issue sweat equity shares to its employees at a discount or for consideration other than cash unless the issue was authorised by a special resolution. An employee for the purpose of this rule was defined to be a permanent employee of the company who has been working in India or outside India, for at least last 1 (One) year.
The amendment to the Rules has removed the phrase “for at least last one year” from the definition of employee and has extended the ambit of this rule to employees of the company who have been in the company for a period of less than 1 (One) year.
- The Companies (Management and Administration) Second Amendment Rules, 2018 dated June 13, 2018
MCA, vide amendment to the Companies (Management and Administration) Rules, 2014, has removed rules 13, 15(6) and explanation after clause (ix) of Rule 18(3). The omitted entries dealt with provisions regarding returns to be filed in case of change in shareholding position of promoters and top 10 (Ten) shareholders, maintaining and keeping of register of members etc. and notice of extra ordinary general meeting.
The amendment has also substituted the proviso to rule 22(16) which dealt with the procedure to be followed for conducting business through postal ballot. The substituted provision states that any item of business, required to be transacted by means of postal ballot, may be transacted at a general meeting by a company which is required to provide the facility to members to vote by electronic means as per applicable laws.