Centre notifies Companies (Amendment) Act, 2017

The Centre has notified the Companies (Amendment) Act, 2017, which 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. The Act was notified on January 3, 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)," an official notification said.

"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," it said.

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% of the net profits.

However, the Amendment Act now requires that where a company has defaulted in payment of dues to any bank or public financial institution, prior approval of the bank or public financial institution shall be obtained by the company before obtaining the approval in the general meeting.

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 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.