Latest developments in the Companies Act- ‘Ask an Expert’

This post has been contributed by Mr. Gaurav Pingle, Principal at Gaurav Pingle & Associates. He may be reached at gp@csgauravpingle.com.


Companies Act, 2013 has been a significant legal reform in the Indian legal system. Several corporate governance provisions were made applicable to public companies, accountability of directors and statutory auditors has increased, duties of directors were codified, global concepts such as class action suits, Corporate Social responsibility, One Person Company were included in the Act. After the 2017 amendment to the Companies Act, it is now possible for a registered company to adopt a financial year different from April 1 – March 31.

Pursuant to the provisions of sub-section (41) of section 2 of the Companies Act, 2013 (prior amendment), a company can follow a different financial year and align with its holding company and subsidiary company, both incorporated outside India. Now, a company can align its financial year with the that of its associate company incorporated outside India.

The Companies (Amendment) Act, 2017 has reduced the timelines for incorporation of a company, eased the way of raising money from a private equity investor (i.e. the issue of shares on private placement bases), also several provisions of board meetings and shareholders meetings have been amended. The provision relating to ‘loan to directors’ has been streamlined to some extent, wherein the complete prohibition has been lifted. The provisions have been rationalized and to some extent, the provisions have been made more business-friendly.

In my view, the Act requires these further amendments/clarifications:

  • The definition of ‘associate company’ needs a re-look;
  • For effective implementation of the provisions relating to Related Party Transactions, there should be some clarity on the concepts like ‘ordinary course of business’;
  • In the newly inserted provision (Section 185 – loans to directors), there should be more clarity on the phrase ‘principal business activity’; and
  • Certain provisions relating to directors appointment and resignation also require some more clarity.

L&P Editorial Team

The Law & Practice Blog's editorial team.

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