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Companies (Amendment) Bill, 2017 passed by the Government December, 2017

The Companies (Amendment) Bill, 2017 (“the Bill”) has been passed by both the houses to become the law of the land. The amendments proposed in the Bill are broadly aimed at addressing difficulties faced by stakeholders in implementing of the Companies Act, 2013 (“the Act”). The Bill intends to strengthen corporate governance standards, initiate strict action against defaulting companies and help improve ease of doing business.

The Bill provides for stringent penalties in case of non-filing of balance sheet and annual return every year, which will act as deterrent to shell companies. Moreover, certain classes of profitable companies are required to shell out at least 2% of their three-year annual average net profit towards corporate social responsibility (CSR) activities. In case of non-expenditure, such entities are required to provide reasons for it to the ministry.

The Bill has been formulated: to align disclosure requirements in the prospectus with the regulations to be made by SEBI; for maintenance of register of significant beneficial owners and filing of returns in this regard to the ROC and; removal of requirement for annual ratification of appointment or continuance of auditor.

Other amendments make the offence of contravention of provisions relating to deposits a non-compoundable offence, requirement by the companies to attach the financial statement of associate companies and stringent additional fees of Rs 100 per day in case of delay in filing of annual return and financial statement etc. The bill provides for more than 40 amendments which will help in simplifying procedures, make compliance easy and take stringent actions against defaulting companies.