COMPANIES (AMENDMENT) BILL, 2014 A Step in the Right Direction for Ease of Doing Business

The Rajya Sabha passed the Companies (Amendment) Bill, 2014 on 13th May 2015 which was previously passed by the Lok Sabha on 17th December 2014 which will reflect in at least 16 amendments in the erstwhile Companies Act 2013.

The Government had received representations from various stakeholders such as Industry Chambers, Professional Institutes, Legal Experts and Ministries/Departments expressing practical difficulties in complying with certain requirements laid down in the commenced provisions of the Companies Act, 2013.

The primary intention of passing the Companies (Amendment) Bill 2014 is to improve India’s ranking on the Ease of Doing Business survey on which India currently ranks 142 among 189 countries. Prime Minister Narendra Modi has been focused on improving the current business environment and improving perception of foreign investors regarding the regulatory compliance burden.

Summary of Amendments for Ease of Doing Business:

  • Doing away with the requirement for minimum paid up share capital for incorporation of a Company
  • Making the use of Common Seal optional.
  • Denying access of Board resolutions filed with the Registrar during public inspection of Company’s documents.
  • Allowing companies to write off past losses/depreciation before declaring dividend for the year.
  • Prescribing thresholds beyond which fraud needs to be reported to the Central Government, however any fraud below such threshold must be reported to the Audit Committee.
  • Relief under Section 185 for loans, guarantees or securities to wholly owned subsidiaries
  • Enabling the Audit Committee to concentrate on its other core activities by granting omnibus approvals for related party transactions on annual basis.
  • Substitution of ‘Special resolution’ with ‘Ordinary resolution’ with respect to the approval of related party transactions by non-related shareholders.
  • Exemption for approval of related party transactions between holding companies and wholly owned subsidiaries.
  • Applying the restrictions of Bail only for offences relating to Fraud under Section 447.
  • Cases of Winding Up to be heard by 2 member Bench instead of a 3 member Bench.
  • Only offences carrying imprisonment of two years or more to be tried by the Special Courts.
  • Specific punishment prescribed for contravention with regards to the deposits accepted under the Act.
  • Correcting the requirement of transferring equity shares for which unclaimed/unpaid dividend has been transferred to the IEPF even though subsequent dividend(s) has been claimed.


The relaxations granted by the Companies (Amendment) Bill 2014 dilute the burden of procedural compliances, especially when it comes to related party transactions which have been a problematic area for many corporates.

The intent of the legislators is clear i.e. removal of all impractical and redundant provisions which have limited applicability in modern business transactions. Corporates will now be able to carry on day to day business and concentrate on more critical issues without worrying about approvals at every stage for group level transactions.

Arun Jaitley, Finance Minister stated that “A broad-based committee will continue to go into this question for the next few months as to where the shoe pinches, and this may not be the last amendments which we are bringing in,”[1]

The Companies (Amendment) Bill, 2014 has brought significant changes and removed various practical difficulties in implementation of the new corporate regime. However only industry acceptance, foreign investors’ participation and this year’s rankings on the Doing Business Index will tell whether these changes have positively impacted the Indian economy.



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