Private Limited

Company Law Committee Report: Proposed Changes To Companies Act, 2013

The Company Law Committee was defined to bring changes to the Companies Act 2013. This committee has made many changes resulting in many rules. These recommendations are proposals and need to be passed. Here, we have come up with some proposed changes regarding the Company Law Committee. Let’s take a look at this.

News: India Inc. welcomes the most recent Company Law Committee (CLC) Report because it has simplified numerous grids and compliance checks. Among other reforms, these involve reworking the current system of fractional shares, restricted stock units, and stock appreciation rights.


The Company Law Committee (2022) (CLC-2022) report makes several recommendations for amendments to the Companies Act of 2013. The proposed improvements include recognising new ideas, accelerating business procedures, enhancing compliance standards, and clarifying current clauses. The Committee intended to add enabling clauses to CA-13 so that different business practises, such as stock appreciation rights, restricted stock units, and unique purpose acquisition companies, might be recognised explicitly.Below, you’ll find some of the services provided at Vakilsearch that may answer yours on the procedure, documents, and process flow for a government or tax registration.

Register a Company PF Registration MSME Registration
Income Tax Return FSSAI registration Trademark Registration
ESI Registration ISO certification Patent Filing in India

All of these changes are intended to facilitate and promote easier commercial operations in India as well as the efficient application of the Limited Liability Partnership Act of 2008, the Companies Act of 2013, and the Rules established thereunder. The following is a summary of the CLC committee’s proposals regarding the 2013 Companies Act:

Changes to Section 398

The Central Government is given the authority to establish regulations governing the submission of applications, papers, inspections, etc., in electronic form by Section 398 of the Companies Act of 2013.As stated in the explanation to section 398 (1), no rules adopted under this section may be related to the levying of fines or other financial penalties, the demand or payment of fees, the violation of any of the Act’s requirements, or the repercussions of such violations.The justification serves as a barrier to some computerised adjudication-related actions.

Changes to Section 446B

By section 446B’s provisions, if a One Person Company, Small Business, Start-Up, or Producer Company, any of its officers in default, or any other person in respect of such company, violates any provision of this Act, the company, the officer in default, or the other person, as the case may be, shall be liable for a fine that may not exceed half of the fine specified in such proviso.

Changes to Section 53

A firm is not allowed to offer shares at a discount under Section 53. The Committee noted that it might be difficult for distressed enterprises to raise additional share capital for the company’s resuscitation if the shares’ market value falls below the nominal value.The committee advocated allowing troubled corporations to sell shares at a discount to the federal government, state governments, or any other group of people that may be specified.

Changes to Section 20

The method for serving documents on a corporation, its officials, or the Registrar of Companies is outlined in Section 20 of the act (RoC).The Committee suggested including a clause allowing the Central Government to establish regulations for any class or classes of organisations that must furnish all members with papers via electronic means only.The committee further explained that in cases where a member has asked for the corporation to serve documents in physical form as well, the company must comply.

Changes to Section 366

A cooperative society registered under any law dealing to cooperative societies is expressly excluded from the definition of a body corporate under Section 2(11) of the 2013 Companies Act.

But according to Section 366(1) of the Companies Act of 2013, any partnership firm, limited liability partnership, cooperative society, society, or other commercial organisation may submit a registration application.Cooperative societies are permitted to become corporations under Section 366 without re-incorporation. While per the RBI’s plan, a Primary (Urban) Co-operative Bank (UCB) may only become a Small Finance Bank (SFB) by forming a new company by the Companies Act of 2013, as the UCB’s license cannot be directly changed into an SFB’s.Instead, the SFB, a freshly created firm, receives the banking license after RBI approval.

Acknowledging Fractional Shares

Currently, Section 4 of the Companies Act stipulates that a person must own a minimum of one share. Additionally, a firm is prohibited from identifying fractional shares under schedule I, Table F. The CLC Report does advocate changing the current clause to permit the issuance, ownership, and even transfer of fractional shares. Naturally, this is only advised in dematerialised form at this time. Second, this advice is not specifically for M&A situations but for cases of new share issuance.


If you have been confused about the Company Law Committee, then you need to know about the changes it could bring. Some possible changes we saw above show that it brings benefits such as better compliance, equity, object clause, capital contribution, and loans to directors. It will bring these benefits if it is passed successfully.


Back to top button


Remove Adblocker Extension