Amendments for CA Final Law: May 2016

Make Notes

Amendments Under:
Foreign Exchange Management Act, 1999
Prohibition on acquisition or transfer of immovable property in India
by citizens of certain countries
No person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan,
Macau or Hong Kong without prior permission of the Reserve Bank shall acquire or transfer immovable
property in India, other than lease, not exceeding five years.

Amendment to the Regulation Chit Funds

The Registrar of Chits or an officer authorised by the state government in this behalf, may, in consultation with the State Government concerned, permit any chit fund to accept subscription from Nonresident Indians. Non- resident Indians shall be eligible to subscribe, through banking channel and on
non- repatriation basis, to such chit funds , without limit subject to the conditions stipulated by the
Reserve Bank of India from time to time .

Amendment to the Regulations: Capital Account Transactions

In the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000, in
Regulation 4, in sub-regulation (a), for the existing provisos, the following shall be substituted:"PROVIDED that
(a) subject to the provisions of the Act or the rules or regulations or directions or orders made or issued
thereunder, a resident individual may, draw from an authorized person foreign exchange not exceeding
USD 250,000 per financial year or such amount as decided by Reserve Bank from time to time for a
capital account transaction specified in Schedule I.
Explanation: Drawal of foreign exchange as per item number 1 of Schedule III to Foreign Exchange
Management (Current Account Transactions) Rules, 2000 dated 3rd May 2000 as amended from time
to time, shall be subsumed within the limit under proviso (a) above.
(b) Where the drawal of foreign exchange by a resident individual for any capital account transaction
specified in Schedule I exceeds USD 250,000 per financial year, or as decided by Reserve Bank from
time to time as the case may be, the limit specified in the regulations relevant to the transaction shall
apply with respect to such drawal.
PROVIDED FURTHER that no part of the foreign exchange of USD 250,000, drawn under proviso (a) shall
be used for remittance directly or indirectly to countries notified as non-co-operative countries and
territories by Financial Action Task Force (FATF) from time to time and communicated by the Reserve
Bank of India to all concerned."

CA Darshan D. Khare

1.1

Make Notes

Amendments For CA Final Law: May 2016

Amendments Under:
Security Exchange Board Of India Act, 1992
Amendment in ICDR Regulation number 10: Fast Track Issue
a.

the equity shares of the issuer have been listed on any recognised stock exchange having
nationwide trading terminals for a period of at least three years immediately preceding
the reference date;
b. the average market capitalisation of public shareholding of the issuer is at least Rs. 1000
cr in case of public issue and Rs. 250 cr in case of rights issue;
c. the annualised trading turnover of the equity shares of the issuer during six calendar
months immediately preceding the month of the reference date has been at least 2% of
the eighted a e age u e of e uit sha es listed du i g su h si o ths pe iod:
[Provided that for issuers, whose public shareholding is less than 15% of its issued
equity capital, the annualised trading turnover of its equity shares has been at least 2% of
the weighted average number of equity shares available as free float during such six
o ths pe iod;]
d. the issuer has redressed at least 95% of the complaints received from the investors till the
end of the quarter immediately preceding the month of the reference date;
e. the issuer has been in compliance with the equity listing agreement for a period of at least
three years immediately preceding the reference date:
[Provided that if the issuer has not complied with the provision of the equity listing
agreement relating to composition of board of directors, for any quarter during the last
three years immediately preceding the reference date, but is compliant with such provisions at the time of filing of offer document with the Registrar of Companies or designated
stock exchange, as the case may be, and adequate disclosures are made in the offer document about such non-compliances during the three years immediately preceding the reference date, it shall be deemed as compliance with the condition;
Provided further that imposition of only monetary fines by stock exchanges on
the issuer shall not be a ground for ineligibility for undertaking issuances under this regulation.
f. the i pa t of audito s ualifi atio s, if a , o the audited a ou ts of the issue i espect of those financial years for which such accounts are disclosed in the offer document
does not exceed 5% of the net profit or loss after tax of the issuer for the respective years;
g. no show-cause notices have been issued or prosecution proceedings initiated by the Board
or pending against the issuer or its promoters or whole time directors as on the reference
date;
(ga) the issuer or promoter or promoter group or director of the issuer has not settled
any alleged violation of securities laws through the consent or settlement mechanism with
the Board during three years immediately preceding the reference date.
h. The entire shareholding of the promoter group of the issuer is held in dematerialised form
on the reference date.

1.2

CA Darshan D. Khare

i.

j.
k.

l.

Amendments for CA Final Law: May 2016

in case of a rights issue, promoters and promoter group shall mandatorily subscribe to
their rights entitlement and shall not renounce their rights, except to the extent of renunciation within the promoter group or for the purpose of complying with minimum
public shareholding norms prescribed under Rule 19A of the Securities Contracts (Regulation) Rules, 1957;
the equity shares of the issuer have not been suspended from trading as a disciplinary
measure during last three years immediately preceding the reference date;
the annualized delivery-based trading turnover of the equity shares during six calendar
months immediately preceding the month of the reference date has been at least ten
pe e t of the eighted a e age u e of e uit sha es listed du i g su h si
o ths
period;
there shall be no conflict of interest between the lead merchant banker(s) and the issuer
or its group or associate company in accordance with applicable regulations.

Make Notes

Amendment in allocation to Anchor Investor: Sch XI Part A

1. An Anchor Investor shall make an application of a value of at least Rs. 10 crore in the public issue.
2. Allocation to Anchor Investors shall be on a discretionary basis and subject to a minimum
number of 2 such investors for allocation of upto Rs. 250 crore and 5 such investors for allocation of more than Rs. 250 crore.
3. Upto thirty per cent. of the portion available for allocation to qualified institutional buyers
shall be available to anchor investor(s) for allocation/allotment ( anchor investor portion ).
4. One-third of the anchor investor portion shall be reserved for domestic mutual funds.
5. The bidding for Anchor Investors shall open one day before the issue opening date.
6. Anchor Investors shall pay a margin of at least 25% on application with the balance to be
paid within two days of the date of closure of the issue.
7. Allocation to Anchor Investors shall be completed on the day of bidding by Anchor Investors.
8. The number of shares allocated to Anchor Investors and the price at which the allocation is
made, shall be made available in public domain by the merchant banker before opening of
the issue.
9. There shall be a lock-in of 30 days on the shares allotted to the Anchor Investor from the
date of allotment in the public issue.

Amendment in ICDR Reg 58: Disclosure in Abridged Prospectus

(I)
(II)

Disclosures:
Information as is material and appropriate to enable the investors to make an informed
decision shall be disclosed in the abridged prospectus.
An issuer making a public issue of specified securities shall make the disclosures in the
abridged prospectus as per the format specified by the Board from time to time.
CA Darshan D. Khare

1.3

Make Notes

(III)
(IV)
(V)
(VI)
(VII)
(VIII)
(IX)
(X)

1.4

Amendments For CA Final Law: May 2016

General Instructions:
The abridged prospectus shall be submitted to the Board (one copy).
The abridged prospectus including the application form shall not exceed 5 sheets
(printed both sides).
Information which is of generic nature and not specific to the issuer shall be brought
out in the form of a General Information Document (GID) as specified by the Board.
Abridged Prospectus shall be printed in a booklet form of A4 size paper.
The Abridged Prospectus shall be printed in a font size which shall not be visually smaller than Times New Roman size 11 (or equivalent) with 1.0 line spacing.
Information required to be given in Tabular Format shall not appear in running text
format.
The order in which items appear in the abridged prospectus shall be as specified by the
Board.
The application form shall be so positioned that on the tearing-off of the application
form, no part of the information given in the abridged prospectus is mutilated."

CA Darshan D. Khare

Amendments for CA Final Law: May 2016

Make Notes

Amendment Under:
Companies Act, 2013
The MCA vide Notification No. S.O. 1440(E) dated 29th May, 2015 notified the
following amendments amongst various Sections.

Section 123: Declaration of dividend

In Section 123(1) after third proviso the following was added as fourth Proviso:

Amendment

Effect

Provided also that no company shall declare

dividend unless carried over previous losses
and depreciation not provided in previous
year or years are set off against profit of the
company for the current year.

With insertion of 4th proviso in section

123(1), no Co. shall declare dividend unless
carried over previous losses and depreciation
not provided in previous year(s) are set off
against profit of the company for the current
year.

Example:
Mea i g of dedu tio of p e ious ea s loss o dep e iatio .
If the Profit for year 25-26 is Rs. 5 lacs and the company wants to declare the dividend then the
deduct the following amount from the last column first.
FY
PAT + Depreciation Depreciation
PAT
Lower of (Loss / Depre)
20-21 90,000
(30,000)
60,000
NA (as there is no loss)
21-22 30,000
(40,000)
(10,000)
(10,000)
22-23 (20,000)
(30,000)
(50,000)
(30,000)
23-24 40,000
(60,000)
(20,000)
(20,000)
24-25 (15,000)
(25,000)
(40,000)
(25,000)
So Rs. 5 lakhs (10,000 + 30,0000 + 20,000 + 25000) = Rs. 4.15 lakhs.
BOD can transfer the amount to reserve from above amount of Rs. 4.15 lakhs by passing BMOR. Assuming such amount is of transfer is Rs. 2.15 lakhs, then the distributable profit will be
Rs. 2 lakhs for purpose of payment of dividend.

Section 124: Unpaid Dividend Account

The Amended Section 124 (6) shall be read as under:

Amendment

Effect

All shares in respect of which dividend has The company shall transfer those shares to
not been paid or claimed for seven consecu- IEPF on which the dividend is unclaimed or
tive years or more shall be transferred by the unpaid.
CA Darshan D. Khare

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Make Notes

Amendments For CA Final Law: May 2016

company in the name of Investor Education The company shall file the details of the transand Protection Fund along with a statement fer to the prescribed authority as per sec 125.
containing such details as may be prescribed:
1. If the shares of any shareholder are
Provided that any claimant of shares transtransferred to IEPF as per above subsecferred above shall be entitled to claim the
tion 124(6) then he can reclaim the same
transfer of shares from Investor Education and
on submission of required identification
Protection Fund in accordance with such prodocuments and proofs.
cedure and on submission of such documents 2. But this section does not give the power
as may be prescribed.
to any shareholder to claim the unpaid /
unclaimed dividend from the IEPF. The
dividend once transferred to IEPF cannot
be claimed in any case.

In section 134 (3) after clause (c), the following was inserted:
Amendment

Effect

(ca) details in respect of frauds reported by

auditors under sub-section (12) of section 143
other than those which are reportable to the
Central Government;

With this amendment the Board of Directors

has to gi e details i Boa ds epo t a out the
fraud reported by the auditors that are not
required to be reported to the Central Government.

Section 143: Power and Duties of Auditor and Auditing standards

The Amended Section 143 (12) shall be read as under:
[Note: this section of Companies (Amendment) Act, 2015 is not yet notified]

1.6

Amendment

Effect

(12) Notwithstanding anything contained in this section, if an auditor of

a company in the course of the performance of his duties as auditor, has
reason to believe that an offence of fraud involving such amount or
amounts as may be prescribed, is being or has been committed in the
company by its officers or employees, the auditor shall report the matter to the Central Government within such time and in such manner as
may be prescribed.
Provided that in case of a fraud involving lesser than the specified
amount, the auditor shall report the matter to the audit committee constituted under section 177 or to the Board in other cases within such
time and in such manner as may be prescribed.
Provided further that the companies, whose auditors have reported
frauds under this sub-section to the audit committee or the Board but
not reported to the Central Government, shall disclose the details about

The Auditor need to

report to immaterial
frauds to the board
or Audit Committee,
if any, and material
frauds to the Central Government, as
the case may be,
which he came
across during the
audit of the company committed by its
officers and employees.

CA Darshan D. Khare

Amendments for CA Final Law: May 2016

su h f auds i the Boa ds epo t i su h

e as

Make Notes

e p es i ed.

Section 177: Audit Committee

In Section 177(4) after clause (iv) the following proviso has been inserted[Note: this section of Companies (Amendment) Act, 2015 is not yet notified]

Amendment

Effect

Provided that the Audit Committee may

make omnibus approval for related party
transactions proposed to be entered into by
the company subject to such conditions as
may be prescribed;

With this amendment, the Audit Committee

has been given power to give omnibus approvals for related party transactions proposed to be entered into by the Company
upto certain threshold.

Section 185: Loan to Director

In section 185 (1) (b) the following clauses and proviso has been inserted:

Amendment

Effect

(c) any loan made by a holding company to its

wholly owned subsidiary\ company or any
guarantee given or security provided by a
holding company in respect of any loan made
to its wholly owned subsidiary company; or
(d) any guarantee given or security provided
by a holding company in respect of loan made
by any bank or financial institution to its subsidiary company:
Provided that the loans made under clauses
(c) and (d) are utilised by the subsidiary company for its principal business activities.

The loan as follows is allowed and sec 185 will

not be applicable to same.
a. *The loan or guarantee given by holding
company to wholly owned subsidiary
company or on behalf of it is exempt.
b. *Any guarantee or security given by
holding company for loan made by bank
to its normal subsidiary company is exempt.
*Provided loan availed by subsidiary company
under point c and d above shall be used by
such company for its principal business activity.

Section 188: Related Party Transactions [RPTs]

After Amendment Section 188(1) shall be read as:

Amendment

Effect

(i) for the words special resolution , at both the places

where they occur, the word resolution shall be substituted;
(ii) after the third proviso, the following proviso shall be
inserted, namely:
Provided also that the requirement of passing the resolution under first proviso shall not be applicable for transactions entered into between a holding company and its
wholly owned subsidiary whose accounts are consolidated

In consideration of practical difficulties faced by corporates the

requirement of special resolution for passing RPT has been
diluted. Members may pass such
transactions by an ordinary
resolution. The requirement of
passing of RPTs by Ordinary
Resolution is now not applicable

CA Darshan D. Khare

1.7

Make Notes

Amendments For CA Final Law: May 2016

with such holding company and placed before the share- for transactions between holdholders at the general meeting for approval;
ing and wholly owned subsidiary
After Amendment Section 188(3) shall be read as:
companies.
for the words special resolution , the word resolution
shall be substituted.

Exemption Notifications for Various Companies

For Private Companies: NOTIFICATION NO. GSR 464(E) [F.NO.1/1/2014-CL-V], DATED 5-62015

Private Company Exemptions

Exemption
Chapter I, subclause (viii) of
clause (76) of
section 2.

Chapter X,
Clause (g) of
sub-section (3)
of section 141.

Sec 141
Disqualification
of Auditor

Chapter XI,
section 160.

Sec 160
Appointment of
new Director

Chapter XI,
section 162.

Sec 162
Two or more
Directors in one
resolution
Sec 180
Powers of General Meeting

Chapter XII,
section 180.

Chapter XII,
sub-section (2)
of section 184.

1.8

Relevant Sections
Sec 188
Related Parties
Transaction

Effect of Exemption
Effect: Section 2(76)(viii) is not applicable to a private
company with respect to Section 188 (i.e. related party
transactions).
Accordingly a holding/ subsidiary/ associate company of a
private limited company or a subsidiary of holding company of a private limited company will not be considered
as related party.
Section 141(3) deals with conditions for eligibility for appointment as an auditor of a company. Section 143(3)(g)
limits
the number of audits by an auditor to twenty companies.
OPCs, Dormant Cos., Small Cos. and Pvt. Cos. having paidup share capital less than Rs 100 cr are excluded from
this limit.
Section 160 deal with right of persons other than retiring
directors to stand for directorship. Now, for private compa ies e ui e e t of Deposit of Rs 1 La is ot equired.
Section 162 deals with appointment of directors to be
voted individually. Now, more than one director can be
appointed through a single resolution.

Section 180 deals with restrictions on powers of the

Board and gives powers to General Meeting. Special Resolution is not required to exercise such power of board as
provided in Section 180
Sec 184
Section 184 deals with disclosure of interest by director.
Disclosure of
Section 184(2) prohibits interested director from particiinterest by direc- pating in meeting. Interested director of a private comtor
pany can participate in the meeting after disclosing his
interest.
1. He can participate in meeting.
2. He will be counted for quorum.

CA Darshan D. Khare

Amendments for CA Final Law: May 2016

Chapter XII,
section 185.

Sec 185
Loans to Directors

Make Notes

3. He can vote on such interested resolution

Shall not apply to a private company
(a) in whose share capital no other body corporate has
invested any money;
(b) if the borrowings of such a Co. from Banks or Financial
Institutions or any Body Corporate is less than twice of its
Paid up share capital or Rs. 50 Cr., whichever is lower;
and
(c) such a Co. has no default in repayment of such borrowings subsisting at the time of making transactions
under this section.

Applicability of sec 185

Section is applicable to all public
companies.

and

Section is applicable private

companies in whichor

Borrowing from the banks / FI / any Body

corporate is exceeding lower of:
a. 2 X Paid up capital
b. Rs. 50 cr
Chapter XII,
2nd proviso to
sub-section (1)
of section 188

Sec 188
Related parties
Transaction

Chapter XIII,
sub-sections
(4) and (5) of
section 196.

Sec 196 Appointment of

Executive Director

The other body

corporate have
invested share capital.

Second proviso to Section 188(1) states that no member

of the company shall vote on such resolution, to approve
any contract or arrangement which may be entered into
by the company, if such member is a related party. In Pvt.
Co., related party to any contract or arrangement can
vote on such resolution as a member of the company.
Section 196(4) deals with appointment of MD, WTD,
Manager. Section 196(5) deals with validating actions of
MD, WTD, Manager, if the appointment is not approved
by a company in general meeting. Approval of CG on variation of terms of appointment from Schedule V is not
required for private companies.

CA Darshan D. Khare

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Make Notes

Amendments For CA Final Law: May 2016

Government Company Exemptions

Exemption

Relevant
Sections
Sec 123
Declaration of
Dividend

Chapter VIII,
second proviso to subsection (1)
of
section 123.
Chapter VIII, Sec 123(4)
sub-section Transfer of
(4) of secdividend
tion 123
to separate account

Chapter IX,
section 129.

Chapter IX,
clause (e) of
sub-section
(3) of sec.
134

1.10

Sec 129
Provisions
regarding
the financial statement
134(3)
Contents
of Boa ds
Report

Chapter IX,
clause (p) of
sub-section
(3) of section
134.

134(3)
Contents
of Boa ds
Report

Chapter XI,
section
149(1)(b)
and first
proviso to
sub-section

Sec 149(1)
Min/max
directors,
One woman director.

Type

Effect of Exemption

WOS

In case of inadequate profit in the current year the

Government company can declare dividend out of
accumulated profit without following the rules required to declare the dividend out of such accumulated profit.

WOS

Defence
Production

Section 123(4) states that the amount of dividend,

including interim dividend, shall be deposited in a
scheduled bank in a separate bank in a separate
account within five days from the date of declaration of such dividend. It does not apply to a Government Co. in which the entire paid up share capital is held by the Central Government, or by any
State Government or Governments or by the Central Government and one or more State Governments or by one or more Govt. Co.
The provisions of sec 129 which applies the financial statement requires the compliance of all AS
including the AS 17 segment reporting. The same
provision relating to AS 117 is not applicable to
Government company.

The Boa ds epo t shall dis lose the co pa s

poli o di e to s appoi t e t a d remuneration
All
Gov including criteria for determining qualifications,
Companies positive attributes, independence of a director and
other matters provided under sub-section (3) of
section 178. It shall not apply to Government Companies.
The board report shall disclose a statement indicatWhere
ing the manner in which formal annual evaluation
Evaluation
has been made by the Board of its own perforis made by mance and that of its committees and individual
Dept of CG directors. In case the directors are evaluated by the
Ministry or Department of the Central Government
which is administratively in charge of the Co., the
State Government, as per its own evaluation methodology shall not be liable for such statement and
its comments.
Provisions relating to maximum number of directors as provided in Section 149 do not apply to
All
Gov Government Companies. Thus the government
Companies companies can appoint maximum number of directors above 15 without passing the special resolution in the GM. The can be appointed by GM-OR.

CA Darshan D. Khare

Amendments for CA Final Law: May 2016

(1) of section 149.
Chapter XI,
clause (a) of
sub-section
(6) of section
149.

Make Notes

Sec 149(6)
Independent Director

Sec 149(6) states that, the person who is in the

opinion of the Board, is a person of integrity and
Where
possesses relevant expertise and experience can be
Evaluation
independent director. In case of the Government
is made by company such integrity and possesses relevant exDept of CG pertise and experience will be tested by Ministry or
Department of the Central Government which is
administratively in charge of the company, or, as
the case may be, the State Government
Chapter XI, Sec 149(6)
Section 149(6)(c) states that independent directors
clause (c) of Independnot to have had pecuniary relationship with the
sub-section ent Direc- All
Gov company, its holding, subsidiary or associate com(6) of sector
Companies pany, or their promoters, or directors, during the
tion
two immediately preceding financial years or dur149.
ing the current financial year. This provision shall
not apply to a Government Company.
Chapter XI,
152(5)
The newly appointed director of the government
sub-section Consent to All
Gov company need not file his consent to act as director
(5) of secact as di- Companies under DIR 2 after appointment in the government
tion 152.
rector.
company.
Chapter XI,
152 (6)
The BOD of government company need not be rosub-sections
and (7)
tational or non rotational directors they may have
(6) and (7)
Rotation
fix tenure for the period. The process of the reapof section
of direcWOS and pointment or the automatic reappointment is not
152
tors and
its subsidi- applicable to the directors of the government comfilling up
aries
pany.
of vacancy
of retiring
director.
Chapter XI,
Sec 160
The process of the appointment of the new director
section 160.
AppointWOS and and the notice of 14 days and the deposit of Rs. 1
ment of
its subsidi- lac for such appointment is not applicable to govthe new
aries
ernment company.
director.
Chapter XI,
Sec 162
Government company can appoint 2 or more direcsection 162. Restriction
tors in the one resolution without passing the GMon 2 or
WOS and UR for the same, i.e. only through ordinary resolumore diits subsidi- tion.
rectors in
aries
one resolution.
Chapter XI,
Sec 163
Sec 163 of adoption of the method of proportional
section 163.
ProporWOS and representation is not applicable to the government
tional Rep- its subsidi- company. So government company need not apresentaaries
point min 2/3 directors by this method.
tion
CA Darshan D. Khare

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Make Notes

Amendments For CA Final Law: May 2016

Chapter XI,
sub-section
(2) of section 164.
Chapter XI,
section 170.

Chapter XI,
section 171

Sec 164(2)
Company
default
disqualification
Sec 170
Register of
Key Managerial Persons
Sec 171
Inspection
of Register
Sec 177
Audit
Committee

All Gov
Companies

WOS

WOS

All the directors of the government company will

not be disqualified if any of the disqualification is
attracted by them from sec 164(2).

The Gov company need not maintain the register of

di e to s a d thei ke
a age ial pe so els and
it does not require the filing of DIR 12 with ROC in
case of change of KMP or directors or their holdings.
As there is no register u/s 170 members do not
have power to inspect the same.

Chapter XII,
Audit committee of the Gov company cannot recsub-section
ommend the appointment of the auditor of the
(4) of secAll Gov
Government company as it is made by CAG u/s 139.
tion
Companies The audit committee can only recommend the re177.
muneration of the auditor.
Chapter XII,
Sec 178
Provisions relating induction of directors, criteria/
sub-sections RemuneraAll Gov
qualifications etc. does not apply to a Govt. Co. and
(2), (3) and
tion Com- Companies accordingly, Nomination and Remuneration Com(4) of secmittee
mittee of Govt. Co. will lay down those criteria for
tion
senior management only and other employees.
178.
Chapter XII,
Sec 185
Shall not apply to Government company in case such company
section 185
Loan to
obtains approval of the Ministry or Department of the Central
Directors Government which is administratively in charge of the company,
or, as the case may be, the State Government before making any
loan or giving any guarantee or providing any security under the
section.
Chapter XII,
Sec 186
Shall not apply to
section 186. Loans and (a) a Government company engaged in defence production;
Invest(b) a Government company, other than a listed company, in case
ments by such company obtains approval of the Ministry or Department of
Company the Central Government which is administratively in charge of the
company, or, as the case may be, the State Government before
making any loan or giving any guarantee or providing any security
or making any investment under the section.
Chapter XII,
Sec 188
Shall not apply to
first and
Related
(a) a Government company in respect of contracts or arrangesecond proParties
ments entered into by it with any other Government company;
viso to subTransac- (b) a Government company, other than a listed company, in resection (1)
tion
spect of contracts or arrangements other than those referred to in
of section
clause (a), in case such company obtains approval of the Ministry
188.
or Department of the Central Government which is administratively in charge of the company, or, as the case may be, the State
Government before entering into such contract or arrangement.
Chapter XIII,
Sec 196
These provisions are not applicable to a govern-

1.12

CA Darshan D. Khare

Amendments for CA Final Law: May 2016

sub-sections
(2), (4) and
(5) of section 196.

Appointment of
Executive
Director

Chapter XIII,
section 197

Sec 197
Managerial Remuneration

Chapter XIII,
sub-sections
(1), (2), (3)
and (4) of
section 203.

Sec 203
Appointment of
Whole
time key
Managerial Personnel

Make Notes

All
Gov ment company.
Companies Section 196(2) relates to term of managing director
not to exceed five years.
Section 196(4) relates to approval of the members/
Central Government as the case may be for appointment of managing director.
Section 196(5) relates to validity of actions of Managing Director if his appointment is not approved at
the General Meeting.
The provisions relating to overall maximum manaAll Gov
gerial remuneration and managerial remuneration
Companies in case of absence or inadequacy of profits as given
in section 197 does not apply to a Government
Company. Thus the company can pay any amount
of remuneration to the director in case of loss.
After sub-section (4), the following sub-section shall
be inserted, namely :
All
Gov "(4A) The provisions of sub-sections (1), (2), (3) and
Companies (4) of this section shall not apply to a managing
director or Chief Executive Officer or manager and
in their absence, a whole time director of the Government Company."

CA Darshan D. Khare

1.13

Make Notes

Amendments For CA Final Law: May 2016

Sec 8 Company Exemptions

Exemption
Sub-section (1)
of section 136.

Sub-section (1)
of section 149
and the first
proviso to subsection
(1).
Sub-sections
(4)-(13)
of section 149.
Section 150.

Proviso to subsection (5) of

section 152.

Sub-section (1)
of section 165.
Sub-section (1)
of section 173.

Sub-section (1)
of section 174.

1.14

Relevant Sections
Sec 136
Copies of Financial statements
and audit report inspection
Sec 149
Min/max directors, One woman director.

Sec 149(4)-(13)
Independent
Director
Sec 150
Databank of ID

Sec 152(5)
Filing with ROC
in case of new
appointment by
Director
Sec 165
Max number of
directorship
Sec 173
Number of BM
and its notice

Effect of Exemption
Section 136(1) deals with the rights of members to copies of audited financial statement, before twenty-one
days before the date of annual general meeting. Section
8 companies may send the audited financial statements
14 days before the date of annual general meeting.
Section 149(1) and first proviso to sub-section (1) relates
to minimum and maximum number of directors. It is not
applicable to Section 8 Companies.

The provisions of the independent directors are not applicable to government company.
Section 150 deals with manner of selection of independent directors and maintenance of databank of independent directors, which is not applicable to Section 8 companies.
Proviso to sub-section (5) of section 152 relates to appointment of independent directors. It is not applicable
to section 8 companies.

The directorship of Sec 8 will not be counted for max

number of 20 directorship for an individual.

Section 173(1) mandates convening of first board meeting within 30 days of incorporation and minimum of four
board meeting every year, with a gap not exceeding 120
days between two consecutive meetings. With regard to
Section 8 companies this section shall apply only to the
extent that the Board of Directors, of such Companies
shall hold at least one meeting within every six calendar
months.
Sec 174
The Quorum of the Sec 8 company will be:
Quorum and
either 8 members or 25%, of its total strength whichever
Adjournment of is less"
the BM
Section 174(1) states that the quorum for a meeting of
the Board of Directors of a company shall be one third of
its total strength or two directors, whichever is higher,
and the participation of the directors by video conferencing or by other audio visual means shall also be counted
for the purposes of quorum under this subsection.
In case of Section 8 companies the quorum for the board
meetings shall be either eight members or twenty five

CA Darshan D. Khare

Amendments for CA Final Law: May 2016

Sub-section (2)
of section 177.
Section 178.

Section 179.

Sub-section (2)
of section 184.

Section 189.

Sec 177
Audit Committee
Sec 178
Remuneration
Committee
Sec 179
Powers of BM

Sec 184
Disclosure of
Interest by directors
Sec 189
Register of Related party
Transactions

Make Notes

per cent of its total strength whichever is less. However,

the quorum shall not be less than two members.
The audit Committee of Sec 8 company need not require
the ID as majority.
Section 178 pertains to nomination and remuneration
o
ittee a d stakeholde s elatio ship o
ittee.
Section 178 is not applicable to section 8 companies.
Section 179(3) deals with resolutions to be passed at
meetings of the Board. Section 179(3)(d), (e) and (f) pertains to resolution to borrow monies, to invest funds of
the company and to grant loans or give guarantee or
provide security in respect of loans. These items may be
decided by the Board by circulation in case of Section 8
companies.
Shall apply only if the transaction with reference to section 188 on the basis of terms and conditions of the contract or arrangement exceeds one lakh rupees.
Section 189 deals with register of contracts or arrangements in which directors are interested. Section 189 is
applicable to section 8 companies only if the transaction
with reference to section 188 on the basis of terms and
conditions of the contract or arrangement exceeds one
lakh rupees.

CA Darshan D. Khare

1.15