Changes In The Companies Act

Allowing companies to alter their Memorandum of Association in respect of their objects without confirmation of the Company Law Board except when change of registered office from one state to another is involved.

Permitting companies to issue redeemable preference shares upto a maximum period of 20 years.

Granting of voting rights to mutual funds, venture capital funds etc in respect of their shares in companies.

Debarring companies which default on payment of deposits from raising further deposits or making intercorporate loans/investments.

Empowering the Central government to prescribe ceiling through notifications for claim of arrears of wages or salary of employees in case of companies under winding up.

Allowing companies to file documents on computer format with ROCs.

The Amendment Act, 1996 and a few other provisions of the Amendment Act have been given effect to from March 1, 1997 by issue of separate notifications as under:

Date of effect of Companies (Amendment) Act, 1996: This Amendment Act has been brought into force with effect from March 1, 1997 by Notification No. GSR No. 78 (E), dated February 15, 1997.

Arrears of wages of employees of companies under winding up: The Amendment Act empowers the Central government to prescribe the ceiling for claiming arrears of wages, or salaries of employees of companies which are being wound up. This ceiling has been raised from Rs 1,000 to Rs 20,000 by a notification GSR No. 80(E) issued on February 17, 1997

Restrictions on inter-corporate loans and inter-corporate investments: Sections 370 and 372 of the Companies Act, 1956, deal with inter-corporate loans and inter-corporate investments. The Amendment Act puts a restriction on companies which have defaulted in the repayment of deposits and interest thereupon as per the terms and conditions of the deposits from making any inter-corporate loans/investments.

The rules relating to Sections 370 and 372 of the Companies Act have been framed under Rule 11B and Rule 11C of the Companies (Central Governments) General Rules and Forms, 1956. By notification No. GSR 97(E), dated February 28, 1997, the relevant rules have been amended to bring these provisions in tune with the amended provisions of Sections 370 and 372.

Revised application forms introduced under sections 370 and 372: As mentioned above, there have been some amendments to sections 370 and 372 of the Companies Act and their relevant rules framed thereunder bringing some restrictions on companies which default in deposits. This opportunity has been utilised by the government for amending the concerned application forms (viz form 34 AA and form 34B prescribed under the Companies (Central Governments) Rules and Forms, 1956. These Revised Application Forms (Form 34 AA and Form 34B) have been introduced through GSR No. 126 (E) dated March 1, 1997. Companies will hereafter have to make their applications u/s 370/372 of the Companies Act in the revised application forms only.