Highlights of the Bill
- The Bill amends the Companies Act, 2013 in relation to structuring, disclosure and compliance requirements for companies.
- The Act limits the number of intermediary companies through which investments can be made in a company. Similarly, the Act limits the number of layers of subsidiaries a company can have. The Bill removes these limits.
- The Act requires an individual who has a beneficial interest in the shares of a company to disclose the same. The Bill also requires a group of persons who exercise beneficial control (above 25%) in a company to disclose such interest.
- Under the Act, a separate offer letter should be issued to individuals to whom a private offer of shares has been made. The Bill removes the requirement of such offer letter, but retains the provision related to notifying the Registrar of the return of allotment.
- The Act permits the appointment of members at the level of Joint Secretary to the quasi- judicial tribunal. Under the Bill, a technical member must be at least of the level of an Additional Secretary.
Key Issues and Analysis
- The Bill removes the limit on layers of subsidiaries and intermediaries. This is in line with the Companies Law Committee’s (CLC) recommendations which noted that imposing such limits would affect the company’s structuring and ability to raise funds.
- The Bill permits an Independent Director to have a pecuniary relationship, up to 10% of his total income, with the company. This is in line with the reasoning of the CLC which had stated that minor transactions may not compromise the independence of such Directors.
- Certain recommendations of the CLC have not been included in the Bill. These include issues related to: (i) residence requirements for directors; and (ii) compliance requirements for dormant companies.
- The Bill amends provisions related to (i) the qualifications of technical members, and (ii) the composition of the Selection Committee of the National Companies Law Tribunal and the National Companies Law Appellate Tribunal. The amendments bring these provisions in line with a 2015 Supreme Court judgment.