Lok Sabha passes Companies (Amendment) Bill, 2016

The Lok Sabha on Thursday passed Companies (Amendment) Bill, 2016 that seeks to improve the Ease of Doing Business through simplifying capital raising by companies.

The bill that proposes to remove the restrictions on layers of investment in companies and its subsidiaries was passed through a voice vote. 

Replying to discussions on the Bill, Minister of State for Finance Arjun Ram Meghwal  said that the changes in companies law would help the country move higher in the rankings in the Ease of Doing Business index.

The bill proposes stringent punishment for defaulting companies and makes compliance easier. It facilitates greater flexibility in incorporation of companies and allows independent directors to have pecuniary interest up to 10% in companies.

It proposes to amend section 42 which lays down the framework for private placement of securities. Private placement refers to offer of securities by a company to a select group of persons, as opposed to a public offer.

With the aim to simplify the filing process, the bill proposes to do away with the requirement of issuing a separate offer letter to private individuals. It also proposes to do away with the requirement of recording such offers with the Registrar of Companies.

The other important proposals in the bill include deletion of provisions related to insider trading, definition of beneficial interest and limiting the liability of auditors and audit firms in fraud cases.