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Companies (Amendments) Act 2015: What Has Changed and How It Helps

The object of this article is to highlight the major changes that have occurred in the Companies Amendments Act 2015 (which passed through) and the corresponding benefits witnessed.

What Is the Companies Amendment Act 2015?

Companies Amendment Act 2015 is an amendment to the existing Companies Act. The objective of the amendment is to make the law more conducive to businesses and investment, while also protecting the interests of shareholders.

One of the key changes brought about by the Companies Amendment Act 2015 is the introduction of a new corporate structure known as a holding company. A holding company can own shares in another company (or companies) and can exercise control over them. This provides greater flexibility for businesses, particularly when it comes to raising capital.

Another significant change introduced by the Companies Amendment Act 2015 is the concept of ‘pre-incorporation contracts’. This allows businesses to enter into contracts before they are formally incorporated as a company. This is particularly useful for start-ups who may not yet be in a position to enter into binding agreements.

The Companies Amendment Act 2015 also makes it easier for foreign companies to set up operations in India.Previously, foreign companies were required to obtain approval from the Reserve Bank of India (RBI) before investing in India. However, under the new rules, they will only need to notify the RBI after making their investment. This will help to boost foreign investment into India.

Overall, the Companies Amendment Act 2015 represents a major step forward for businesses in India and will make it easier for them to operate and expand their operations. It is hoped that this will lead to increased economic growth and job creation in India.

Meaning of Governance

In simple terms, good governance in business organizations can be defined as the way power is exercised in the decision-making process of the company for the benefit of all stakeholders. It includes ensuring that there is transparency and accountability in how decisions are made, and that these decisions are taken in the best interest of the company and its stakeholders.

The Companies Amendment Act seeks to improve corporate governance in Indian companies by introducing new provisions relating to Independent Directors, board composition, board meetings, disclosure requirements and code of conduct for directors. These changes will help ensure that companies are run in a transparent and accountable manner, and will ultimately benefit all stakeholders.

Board Structure and Qualifications

The Companies Amendment Act has changed the structure and qualifications for boards of directors. The new law requires that a company have a minimum of three directors, with at least one being a woman. At least one director must also be independent, meaning they are not an employee or shareholder of the company. The Director General of Corporate Affairs (DGCA) will now appoint the chairman of the board, instead of the shareholders.

This change is designed to improve corporate governance and make companies more accountable to their stakeholders. It will also help to protect investors and ensure that companies are run in a more transparent way. The new rules will apply to all companies registered in India, regardless of their size or type.

Role of Independent Directors

Independent directors are considered to be a valuable addition to any board, as they provide an objective perspective and can help to improve board effectiveness. The Companies Amendment Act includes several provisions that aim to promote the role of independent directors, including greater clarity around their duties and responsibilities.

Independent directors are now required to act in the best interests of the company as a whole, rather than just the shareholders. They must also exercise due diligence and care when carrying out their duties, and must avoid any conflicts of interest. In addition, independent directors are now permitted to seek professional advice at the company’s expense in order to fulfil their duties effectively.

The amended Act also includes provisions for the removal of independent directors from office. An independent director may be removed by a resolution of the shareholders if they have been convicted of a criminal offence or if they are found to be unsuitable for the position due to fraud, negligence or other misconduct.

Overall, the amendments to the Companies Act aim to strengthen the role of independent directors in Indian companies. This is expected to improve corporate governance and help protect the interests of all stakeholders involved in businesses.

Minimum Tenure of Independent Directors

Corporate governance reform has been a hot topic in India in recent years. The country’s lawmakers have paid close attention to the issue, and as a result, several changes have been made to the Companies Act of 2013. One of the most significant changes is the introduction of a minimum tenure for independent directors.

Under the new rules, an independent director must serve on the board of a company for at least five years before he or she can be removed from office. This is intended to promote stability and improve governance by ensuring that independent directors have a vested interest in the long-term success of the company.

The change is likely to have a positive impact on investor confidence and will help to further professionalise the boardroom environment in India. It is also another step forward in the country’s journey towards global best practices in corporate governance.

Simplification in the Internal Control Processes

The amendment made to the Companies Act in India has been a big help for businesses in the simplification of their internal control processes. The main aim of the change was to make it easier for businesses to comply with the requirements set out by the law. This has been done by reducing the number of compliance rules and regulations that companies have to follow. In addition, the time limit for filing annual returns and financial statements has been extended from 21 days to 60 days. This will give businesses more time to prepare their reports and make any necessary changes.

Significant Changes

One of the most significant changes under the Companies Amendment Act is the introduction of corporate social responsibility (CSR) obligations for certain companies. Under the act, companies with a net worth of ₹ 5 billion or more, or turnover of ₹10 billion or more, are required to spend 2% of their average net profits on CSR activities. The CSR expenditure must be incurred on activities relating to poverty alleviation, education, health, gender equality, environment protection, and employment generation.

The Companies Amendment Act also introduces several other changes that are aimed at improving corporate governance and making it easier for companies to do business in India. For instance, the act exempts private companies from the requirement to have independent directors on their boards. It also allows foreign investors to hold up to 100% equity in an Indian company without prior approval from the Reserve Bank of India (RBI).

The Companies Amendment Act is a positive step forward for businesses operating in India. The introduction of CSR requirements will encourage companies to give back to society, while the other changes will make it easier for them to do business and expand their operations in India.

Perhaps the most significant change brought about by the Companies Amendment Act is the increase in the minimum number of directors that a public company must have from two to three. This will help ensure that companies are better governed and more accountable to their shareholders.

Other key changes include:

– Allowing companies to raise funds through preferential allotment of shares, without having to go through a public offering – this will help companies tap into new sources of financing

– Introducing penalties for defaulting on corporate social responsibility (CSR) expenditure – this will encourage companies to be more socially responsible

– Making it easier for foreign entities to invest in India – this will help boost foreign investment into the country

Overall, the Companies Amendment Act is a positive step that will help improve corporate governance and encourage more responsible business practices.

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