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COMPANIES ACT (AMENDMENT) BILL, 2006

THE COMPANIES (AMENDMENT) BILL, 2006

(As passed by the Rajya Sabha on 21/3/2006 and the Lok Sabha on 15/5/2006)

A

Bill

further to amend the Companies Act, 1956.

BE it enacted by Parliament in the Fifty-seventh Year of the Republic of India as

follows:—

Short title and commencement

1.(1) This Act may be called the Companies (Amendment) Act, 2006.

(2) It shall come into force on such date as the Central Government may, by notification,

appoint and different dates may be appointed for different provisions of this Act.

Amendment of section 253

2.In section 253 of the Companies Act, 1956 (hereinafter referred to as the principal

Act), the following proviso shall be inserted, namely:—

"Provided that no company shall appoint or re-appoint any individual as director of

the company unless he has been allotted a Director Identification Number under section

266B.".

Insertion of new sections 266A, 266B, 266C, 266D, 266E, 266F and 266G

3. After section 266 of the principal Act, the following sections shall be inserted,

namely:—

'Director Identification Number

Application for allotment of Director Identification Number

266A. Every—

(a)Individual, intending to be appointed as director of a company; or

(b)Director of a company appointed before the commencement of the

Companies (Amendment) Act, 2006,

shall make an application for allotment of Director Identification Number to the Central

Government in such form, and manner (including electronic form) along with such fee, as

may be prescribed:

Provided that every director appointed before the commencement of the

Companies (Amendment) Act, 2006 shall make, within sixty days of the commencement

of the said Act, such application to the Central Government:

Provided further that every applicant, who has made an application under this

section for allotment of Director Identification Number, may be appointed as a director in a

company, or, hold office as director in a company till such time such applicant has been

allotted Director Identification Number.

Allotment of Director Identification Number

266B. The Central Government shall, within one month from the receipt of the

application under section 266A, allot a Director Identification Number to an

applicant, in such manner as may be prescribed.

Prohibition to obtain more than one Director Identification Number

266C. No individual, who had already been allotted a Director Identification Number

under section 266B, shall apply, obtain or possess another Director Identification

Number.

Obligation of Director to intimate Director Identification Number to concerned

company or companies

266D. Every existing director shall, within one month of the receipt of Director

Identification Number from the Central Government, intimate his Director Identification

Number to the company or all companies wherein he is a director.

Obligation of company to inform Director Identification Number to Registrar

266E. (1) Every company shall, within one week of the receipt of intimation under

section 266D, furnish the Director Identification Number of all its directors to the

Registrar or any other officer or authority as may be specified by the Central

Government.

(2) Every intimation under sub-section (1) shall be furnished in such form and

manner as may be prescribed.

Obligation to indicate Director Identification Number

266F. Every person or company, while furnishing any return, information or

particulars as are required to be furnished under this Act, shall quote the Director

Identification Number in such return, information or particulars in case such return,

information or particulars relate to the director or contain any reference of any

director.

Penalty for contravention of provisions of section 266A or section 266C or

section 266D or section 266E

266G If any individual or director, referred to in section 266A or section 266C or section

266D or a company referred to in section 266E, contravenes any of the provisions of those

sections, every such individual or director or the company, as the case may be, who or

which, is in default, shall be punishable with fine which may extend to five thousand

rupees and where the contravention is a continuing one, with a further fine which may

extend to five hundred rupees for every day after the first during which the contravention

continues.

Explanation - For the purposes of sections 266A, 266B, 266C, 266D, 266E and 266F,

the Director Identification Number means a identification number which the Central

Government may allot to any individual, intending to be appointed as director or to any

existing directors of a company, for the purpose of his identification as such".

Insertion of new sections 610B, 610C, 610D, and 610E

4. After section 610A of the principal Act, the following sections shall be inserted,

namely:—

Provisions relating to filing of applications, documents inspection etc. through

electronic form

"610 B. (1) Notwithstanding anything contained in this Act, and without prejudice

to the provisions contained in section 6 of the Information Technology Act, 2000, the

Central Government may, by notification in the Official Gazette, make rules so as to

require from such date as may be specified in the rules, that—

(a) such applications, balance-sheet, prospectus, return, declaration,

memorandum of association, articles of association, particulars of charges, or

any other particulars or document as may be required to be filed or delivered

under this Act or rules made there under, shall be filed, through the electronic

form and authenticated in such manner as may be specified in the rules;

(b) such document, notice, any communication or intimation, required to

be served or delivered under this Act, shall be served or delivered under this

Act through the electronic form and authenticated in such manner as may be

specified in the rules;

(c) such applications, balance-sheet, prospectus, return, register,

memorandum of association, articles of association, particulars of charges, or any

other document and return filed under this Act or rules made there under shall be

maintained by the Registrar in the electronic form and registered or authenticated,

as the case may be, in such manner as may be specified in the rules;

(d)such inspections of the memorandum of association, articles of

association, register, index, balance-sheet, return or any other document

maintained in the electronic form, which is otherwise available for such

inspection

under this Act or rules made there under, may be made by any person through

the electronic form as may be specified in the rules;

(e)such fees, charges or other sums payable under this Act or

rules made

there under shall be paid through the electronic form and in such manner as may

be specified in the rules;

(f) the Registrar shall, register change of registered office, alteration of

memorandum of association or articles of association, prospectus, issue certificate of

incorporation or certificate of commencement of business, register such

document, issue such certificate, record notice, receive such communication as may

be required to be registered or issued or recorded or received, as the case may be,

under this Act or rules made there under or perform duties or discharge functions or

exercise powers under this Act or rules made there under or do any act which is by

this Act directed to be performed or discharged or exercised or done by the

Registrar, by the electronic form, in such manner as may be specified in the rules.

(2) The Central Government may, by notification in the Official Gazette, frame a

scheme to carry out the provisions specified under sub-section ( 1 ) through the

electronic form:

Provided that the Central Government may appoint different dates in respect of

different Registrar of Companies or Regional Directors from which such scheme shall

come into force.

Power to modify act in relation to electronic records (including the manner and

form in which electronic records shall be filed)

610C. (1) The Central Government may, by notification in the Official Gazette,

direct that any of the provisions of this Act, so far as it is required for the purpose of

electronic record specified under section 610B in the electronic form,—

(a) shall not apply, in relation to the matters specified under clauses (a) to (f)

of sub- section (1) of section 610B, as may be specified in the notification; or

(b) shall apply, in relation to the matters specified under clauses (a) to (f)

of sub section ( 1 ) of section 610B only with such consequential exceptions,

modifications or adoptions as may be specified in the notification:

Provided that no such notification which relates to imposition of fines or other

pecuniary penalties or demand or payment of fees or contravention of any of the

provisions of this Act or offence shall be issued under this sub-section.

(2) A copy of every notification proposed to be issued under sub-section (1), shall

be laid in draft before each House of Parliament, while it is in session, for a total period

of thirty days which may be comprised in one session or in two or more successive

sessions, and if, before the expiry of the session immediately following the session or

the successive sessions aforesaid, both Houses agree in disapproving the issue of the

notification or both Houses agree in making any modification in the notification, the

notification shall not be issued or, as the case may be, shall be issued only in such

modified form as may be agreed upon by both the Houses.

Providing of services through electronic form

610D. The Central Government may provide such value added services through the

electronic form and levy such fees as may be prescribed.

Application of provision of Act 21 of 2000

610E. All the provisions of the Information Technology Act, 2000 relating to the

electronic records (including the manner and format in which the electronic records shall

be filed), in so far as they are not inconsistent with this Act, shall apply, or in relation, to

the records in electronic form under section 610B.”.

STATEMENT OF OBJECTS AND REASONS

In context of the rapid developments witnessed in technology, the Ministry of Company

Affairs decided to enable the operations carried out by the Ministry and its field offices to be

performed more efficiently and effectively through the use of contemporary information

technology and computers. It was felt that the earlier efforts at computerisation had not

yielded the desired efficiency in operation of the system and an operating system that took

into account contemporary technology was necessary. Therefore, it was decided to implement

a comprehensive e-Governance system and programme to achieve the above objective.

2. The Ministry of Company Affairs on the recommendations of Department of Information

Technology is implementing an e-Governance initiative through a project named as

"MCA-21". This project will provide the public, corporate entities and others an easy and

secure online access to the corporate information, including filing of documents and public

access to the information required to be in the public domain under the statute, at any time and

from anywhere. This would also result in efficiency in statutory supervision of corporate

processes and efficient professional services under the Companies Act, 1956 (the Act).

3.The filing and registration of documents is a statutory requirement under the Act.

At present, the Act lays down the procedures for filing of various documents in

physical

form and the processes associated therewith. While, the broad enabling framework for

such an initiative is available under the Information Technology Act, 2000 read with

Companies Act, 1956, enabling provisions would still be required to support certain

online electronic processes which have since become available due to technological

advancement for various detailed procedural requirements under the Companies Act,

1956.

4.It is, therefore, proposed to insert new sections 610B, 610C, 610D and 610E in the

Companies Act, 1956 so as to make provision for electronic filing system and for payment

of fees through electronic form under the said Act which are essential for the successful

implementation of the MCA-21 Project. After the proposed amendments to the

Companies Act, 1956 have been enacted, the documents in electronic form duly

authenticated with digital signatures shall be accepted under the provisions of that

Act. The proposed electronic system also provides for multiple modes of payment of

statutory fees.

5.The provisions of the Companies Act, 1956 allow an individual to be a director of up

to fifteen companies and such companies can be located in the jurisdiction in any of

the Registrars of Companies. There is a need for individual identity of person(s) intending

to be directors of companies to be established. This would also facilitate effective legal

action against the directors of such companies under the law, keeping in view the

possibility of fraud by companies and the phenomenon of companies that raise funds

from the public and vanish thereafter. It is, therefore, proposed to insert new sections

266A, 266B, 266C, 266D, 266E, 266F and 266G in the Companies Act, 1956 so as to,

inter alia, provide for allotment of a unique Director Identification Number to any

individual, intending to be appointed as a director in a company or to any existing

director of a company, for the purpose of his identification as such, through electronic

or other form and to provide for penalty for any violation in this regard.

6.This Bill seeks to achieve the above objectives.

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THE COMPANIES BILL, 2009

THE COMPANIES BILL, 2009

_______

ARRANGEMENT OF CLAUSES

Bill No. 59 of 2009

91. (1) A statement setting out all the material facts concerning each item of special business to be transacted at a general meeting, including, in particular, the nature of the concern or interest, if any, of every director and the manager, if any, and of every other key managerial personnel shall be annexed to the notice calling such meeting.

(2) For the purposes of sub-section (1), —

(a) in the case of an annual general meeting, all business to be transacted

thereat shall be deemed special, other than—

(i) the consideration of accounts, balance sheet and the reports of the

Board of Directors and auditors;

(ii) the declaration of any dividend;

(iii) the appointment of directors in place of those retiring;

(iv) the appointment of, and the fixing of the remuneration of, the auditors;

and

(b) in the case of any other meeting, all business shall be deemed to be

special:

Provided that where any item of special business to be transacted at a meeting of the

company relates to or affects any other company, the extent of shareholding interest in that other company of every director, manager, if any, and of every other key managerial personnel of the first mentioned company shall, if the extent of such shareholding is not less than two per cent. of the paid-up share capital of that company, also be set out in the statement.

(3) Where any item of business refers to any document, which is to be considered at the meeting, the time and place where such document can be inspected shall be specified in the statement under sub-section (1).

(4) Where as a result of the non-disclosure or insufficient disclosure in any statement referred to in sub-section (1), being made by a director, manager, if any, or other key managerial personnel, any benefit which accrues to such director, manager or other key managerial personnel or his relatives, either directly or indirectly, the director, manager or other key managerial personnel, as the case may be, shall hold such benefit in trust for the company, and shall, without prejudice to any other action being taken against him under this Act or under any law for the time being in force, be liable to compensate the company

to the extent of the benefit received by him.

(5) Where any default is made in complying with the provisions of this section, every officer of the company who is in default shall be punishable with fine which may extend to Explanatory statement to be annexed with notice.

106. (1) A copy of every resolution or any agreement, in respect of such matters as may be prescribed, together with the explanatory statement under section 91, if any, annexed to the notice calling the meeting in which the resolution is proposed, shall be filed with the Registrar within thirty days of the passing or making thereof in the manner as may be prescribed, with such fee as may be prescribed or with such additional fee as may be prescribed within the time specified, under section 364.

(2) If a company fails to file the resolution or the agreement under sub-section (1) before the expiry of the period specified under section 364 with additional fee, the company shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees and every officer who is in default, including liquidator of the company, if any, shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than one lakh rupees but which may extend

to five lakh rupees, or with both.

107. (1) Every company shall cause to be prepared, signed and kept minutes of the proceedings of every general meeting, including any meeting called by the requisitionists under section 89, and of proceedings of every meeting of any class of shareholders or creditors, and every resolution passed by postal ballot and every meeting of its Board of Directors or of every committee of the Board, within such time and in such manner as may be prescribed.

 (2) The minutes of each meeting shall contain a fair and correct summary of the

proceedings thereat.

(3) All appointments of officers made at any of the meetings aforesaid shall be included in the minutes of the meeting.

(4) In the case of a meeting of the Board of Directors or of a committee of the Board, the minutes shall also contain —

(a) the names of the directors present at the meeting; and

(b) in the case of each resolution passed at the meeting, the names of the directors, if any, dissenting from, or not concurring with the resolution.

(5) There shall not be included in the minutes, any matter which, in the opinion of the Chairman of the meeting,—

(a) is or could reasonably be regarded as defamatory of any person;

(b) is irrelevant or immaterial to the proceedings; or

(c) is detrimental to the interests of the company.

(6) The Chairman shall exercise an absolute discretion in regard to the inclusion or  non-inclusion of any matter in the minutes on the grounds specified in sub-section (5).

(7) Minutes kept in accordance with the provisions of this section shall be evidence of the proceedings recorded therein.

(8) Where minutes have been kept in accordance with sub-section (1) and the rules made thereunder, then, until the contrary is proved, the meeting shall be deemed to have been duly called and held, and all proceedings thereat to have duly taken place, and the resolutions passed by postal ballot to have been duly passed and in particular, all appointments of directors, key managerial personnel, auditors or company secretary in practice, shall be deemed to be valid.

(9) No document purporting to be a report of the proceedings of any general meeting of a company shall be circulated or advertised at the expense of the company, unless it includes the matters required by this section to be contained in the minutes of the proceedings of such meeting.

(10) Every company shall observe such secretarial standards as may be prescribed with respect to general and Board meetings.

(11) If any default is made in complying with the provisions of this section and the rules made thereunder in respect of any meeting, the company shall be liable to a penalty of twenty-five thousand rupees and every officer of the company who is in default shall be liable to a penalty of five thousand rupees.

108. (1) The books containing the minutes of the proceedings of any general meeting of a company, shall—

(a) be kept at the registered office of the company, and

(b) be open, during business hours, to the inspection by any member without

charge, subject to such reasonable restrictions as the company may, by its articles or in general meeting, impose, so, however, that not less than two hours in each business day are allowed for inspection.

(2) Any member shall be entitled to be furnished, within seven working days after he has made a request in that behalf to the company, and on payment of such fees as may be prescribed, with a copy of any minutes referred to in sub-section (1).

(3) If any inspection under sub-section (1) is refused, or if any copy required under sub-section (2) is not furnished within the time specified therein, the company shall be liable to a penalty of twenty-five thousand rupees and every officer of the company who is in default shall be liable to a penalty of five thousand rupees for each such refusal or default, as the case may be.

(4) In the case of any such refusal or default, the Central Government may, without prejudice to any action being taken under sub-section (3), by order, direct an immediate inspection of the minute-books or direct that the copy required shall forthwith be sent to the person requiring it.

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