“”The Central Government notified the Companies (Amendment) Act, 2017 (Amendment Act) on 3rd January, 2018. The provisions of this Amendment Act shall come into force on the date or dates as the Central Government may appoint by notification(s) in the Official Gazette. A few provisions in the Amendment Act have important bearing on the working of the Insolvency and Bankruptcy Code, 2016 (Code)””………and define the reason of amendment in section-53, Section 197, and Section 247″”

However it is no where mentioned that the date of coming into effect of these provisions shall be date of issue of press relase i.e. 8th January 2018. We are assuming that the date of coming into effect of these sections is 8th January 2018.

 

 

Sr. No. Amended Section

Amendments are highlighted as “bold” and in [  ]

Effect
1.        53- Prohibition on issue of shares at discount.

Corresponding sections of the 1956 Act- section 79

Brought into effect from 01-04-2014

Amendment Brought into effect from 08-01-2017

 

53. (1) Except as provided in section 54, a company shall not issue shares at a discount.

(2) Any share issued by a company at a discounted price  [discount] shall be void.

 

[“(2A) Notwithstanding anything contained in sub-sections (1) and (2), a company may issue shares at a discount to its creditors when its debt is converted into shares in pursuance of any statutory resolution plan or debt restructuring scheme in accordance with any guidelines or directions or regulations specified by the Reserve Bank of India under the Reserve Bank of India Act, 1934 or the Banking (Regulation) Act, 1949]

 

(3) Where a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every officer who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both.

 

Section 53 of the Companies Act, 2013 prohibited issuance of shares at a discount.

 

 

The Amendment Act now allows companies to issue shares at a discount to its creditors when its debt is converted into shares in pursuance of any statutory resolution plan such as resolution plan under the Code or debt restructuring scheme.

 

2.        197. (1) The total managerial remuneration payable by a public company, to its directors, including managing director and whole-time director, and its manager in respect of any financial year shall not exceed eleven per cent of the net profits of that company for that financial year computed in the manner laid down in section 198 except that the remuneration of the directors shall not be deducted from the gross profits:

 

Provided that the company in general meeting may,[ with the approval of the Central Government], authorise the payment of remuneration exceeding eleven per cent of the net profits of the company, subject to the provisions of Schedule V:

 

Provided further that, except with the approval of the company in general meeting, [by special resolution]

 

(i) the remuneration payable to any one managing director; or whole-time director or manager shall not exceed five per cent of the net profits of the company and if there is more than one such director remuneration shall not exceed ten per cent of the net profits to all such directors and manager taken together;

 

(ii) the remuneration payable to directors who are neither managing directors nor whole-time directors shall not exceed,—

 

(A) one per cent of the net profits of the company, if there is a managing or whole-time director or manager;

 

(B) three per cent of the net profits in any other case.

[“Provided also that, where the company has defaulted in payment of dues to any bank or public financial institution or non-convertible debenture holders or any other secured creditor, the prior approval of the bank or public financial institution concerned or the non-convertible debenture holders or other secured creditor, as the case may be, shall be obtained by the company before obtaining the approval in the general meeting.]

 

(2) The percentages aforesaid shall be exclusive of any fees payable to directors under sub-section (5).

 

 

(3) Notwithstanding anything contained in sub-sections (1) and (2), but subject to the provisions of Schedule V, if, in any financial year, a company has no profits or its profits are inadequate, the company shall not pay to its directors, including any managing or whole-time director or manager, by way of remuneration any sum exclusive of any fees payable to directors under sub-section (5) hereunder except in accordance with the provisions of Schedule V[ and if it is not able to comply with such provisions, with the previous approval of the Central Government.]

 

(4) The remuneration payable to the directors of a company, including any managing or whole-time director or manager, shall be determined, in accordance with and subject to the provisions of this section, either by the articles of the company, or by a resolution or, if the articles so require, by a special resolution, passed by the company in general meeting and the remuneration payable to a director determined aforesaid shall be inclusive of the remuneration payable to him for the services rendered by him in any other capacity:

 

Provided that any remuneration for services rendered by any such director in other capacity shall not be so included if—

 

(a) the services rendered are of a professional nature; and

 

(b) in the opinion of the Nomination and Remuneration Committee, if the company is covered under sub-section (1) of section 178, or the Board of Directors in other cases, the director possesses the requisite qualification for the practice of the profession.

 

(5) A director may receive remuneration by way of fee for attending meetings of the Board or Committee thereof or for any other purpose whatsoever as may be decided by the Board:

 

Provided that the amount of such fees shall not exceed the amount as may be prescribed:

 

Provided further that different fees for different classes of companies and fees in respect of independent director may be such as may be prescribed.

 

(6) A director or manager may be paid remuneration either by way of a monthly payment or at a specified percentage of the net profits of the company or partly by one way and partly by the other.

 

(7) Notwithstanding anything contained in any other provision of this Act but subject to the provisions of this section, an independent director shall not be entitled to any stock option and may receive remuneration by way of fees provided under sub-section (5), reimbursement of expenses for participation in the Board and other meetings and profit related commission as may be approved by the members.

 

(8) The net profits for the purposes of this section shall be computed in the manner referred to in section 198.

 

[(9) If any director draws or receives, directly or indirectly, by way of remuneration any such sums in excess of the limit prescribed by this section or without the prior sanction of the Central Government, where it is required, he shall refund such sums to the company and until such sum is refunded, hold it in trust for the company.]

[(9) If any director draws or receives, directly or indirectly, by way of remuneration any such sums in excess of the limit prescribed by this section or without approval required under this section, he shall refund such sums to the company, within two years or such lesser period as may be allowed by the company, and until such sum is refunded, hold it in trust for the company.]

 

(10) The company shall not waive the recovery of any sum refundable to it under sub-section (9) unless [permitted by the Central Government]. [approved by the company by special resolution within two years from the date the sum becomes refundable”]

[“Provided that where the company has defaulted in payment of dues to any bank or public financial institution or non-convertible debenture holders or any other secured creditor, the prior approval of the bank or public financial institution concerned or the non-convertible debenture holders or other secured creditor, as the case may be, shall be obtained by the company before obtaining approval of such waiver]

 

(11) In cases where Schedule V is applicable on grounds of no profits or inadequate profits, any provision relating to the remuneration of any director which purports to increase or has the effect of increasing the amount thereof, whether the provision be contained in the company’s memorandum or articles, or in an agreement entered into by it, or in any resolution passed by the company in general meeting or its Board, shall not have any effect unless such increase is in accordance with the conditions specified in that Schedule [and if such conditions are not being complied, the approval of the Central Government had been obtained.]

 

(12) Every listed company shall disclose in the Board’s report, the ratio of the remuneration of each director to the median employee’s remuneration and such other details as may be prescribed.

 

(13) Where any insurance is taken by a company on behalf of its managing director, whole-time director, manager, Chief Executive Officer, Chief Financial Officer or Company Secretary for indemnifying any of them against any liability in respect of any negligence, default, misfeasance, breach of duty or breach of trust for which they may be guilty in relation to the company, the premium paid on such insurance shall not be treated as part of the remuneration payable to any such personnel:

 

Provided that if such person is proved to be guilty, the premium paid on such insurance shall be treated as part of the remuneration.

 

(14) Subject to the provisions of this section, any director who is in receipt of any commission from the company and who is a managing or whole-time director of the company shall not be disqualified from receiving any remuneration or commission from any holding company or subsidiary company of such company subject to its disclosure by the company in the Board’s report.

 

(15) If any person contravenes the provisions of this section, he shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.

 

[“(16) The auditor of the company shall, in his report under section 143, make a statement as to whether the remuneration paid by the company to its directors is in accordance with the provisions of this section, whether remuneration paid to any director is in excess of the limit laid down under this section and give such other details as may be prescribed.]

 

[(17) On and from the commencement of the Companies (Amendment) Act, 2017, any application made to the Central Government under the provisions of this section [as it stood before such commencement], which is pending with that Government shall abate, and the company shall, within one year of such commencement, obtain the approval in accordance with the provisions of this section, as so amended.]

Section 197 of the Companies Act, 2013 required approval of the company in a general meeting for payment of managerial remuneration in excess of 11 percent of the net profits. The Amendment Act now requires that where a company has defaulted in payment of dues to any bank or public financial institution or non-convertible debenture holders or any other secured creditor, the prior approval of the bank or public financial institution concerned or the non-convertible debenture holders or other secured creditor, as the case may be, for such payment of managerial remuneration shall be obtained by the company before obtaining the approval in the general meeting.

 

 

3.        

 

247- Valuation by registered valuers

 

Corresponding sections of the 1956 Act- NA

Brought into effect from:  1810-2017

Amendment Brought into effect from : 08-01-2017

 

 

247. (1) Where a valuation is required to be made in respect of any property, stocks, shares, debentures, securities or goodwill or any other assets (herein referred to as the assets) or net worth of a company or its liabilities under the provision of this Act, it shall be valued by a person having such qualifications and experience and registered as a valuer in such manner, on such terms and conditions as may be prescribed and appointed by the audit committee or in its absence by the Board of Directors of that company.

 

(2) The valuer appointed under sub-section (1) shall,—

 

(a) make an impartial, true and fair valuation of any assets which may be required to be valued;

 

(b) exercise due diligence while performing the functions as valuer;

 

(c) make the valuation in accordance with such rules as may be prescribed; and

 

(d) not undertake valuation of any assets in which he has a direct or indirect interest or becomes so interested at any time [during or after the valuation of assets. ][during a period of three years prior to his appointment as valuer or three years after the valuation of assets was conducted by him”]

(3) If a valuer contravenes the provisions of this section or the rules made thereunder, the valuer shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees:

 

Provided that if the valuer has contravened such provisions with the intention to defraud the company or its members, he shall be punishable with imprisonment for a term which may extend to one year and with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.

 

(4) Where a valuer has been convicted under sub-section (3), he shall be liable to—

 

(i) refund the remuneration received by him to the company; and

 

(ii) pay for damages to the company or to any other person for loss arising out of incorrect or misleading statements of particulars made in his repo

 

Section 247 of the Companies Act, 2013 prohibited a registered valuer from undertaking valuation of any assets in which he has a direct or indirect interest or becomes so interested at any time during or after the valuation of assets.

 

The Amendment Act now prohibits a registered valuer from undertaking valuation of any asset in which he has direct or indirect interest or becomes so interested at any time during three years prior to his appointment as valuer or three years after valuation of assets was conducted by him

 

 

For Kashif Ali & Associates
(Company Secretaries)

Kashif Ali
FCS, LL.B, M.Com.
C-100, GF, Sarai Julena, New Friends Colony, New Delhi-110025
Ph: 9718483209  Mail : cs.alikashif@gmail.com

The Companies Amendment Act, 2017

MCA Updates 6th January 2018
CONDONATION OF DELAY SCHEME 2018”

 

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