In reference to the Companies (Amendment) Act, 2017 (Amendment Act) notified by the Central Govt. on 3 January, 2018. MCA has announced that 3 major provisions of Amendment Act has come into force which is related and have important bearing with Insolvency and Bankruptcy Code, 2016 (Code).
- ALLOWS DISCOUNT ON THE ISSUE OF SHARES UNDER SECTION 53
Under Section 53 of the Companies Act 2013 (‘Act’), after amendment, companies are allowed to issue shares at a discount to its creditors when its debt is converted into shares in pursuance of any statutory resolution plan such as resolution plan under the Code or debt restructuring scheme. Previously, companies were prohibited to issue shares at a discount.
- APPROVAL FOR MANAGERIAL REMUNERATION UNDER SECTION 197
Thereafter, under Section 197 of the Act, companies who have defaulted in payment are required to take prior approval of the bank or public financial institution concerned or the non-convertible debenture holders or other secured creditor, about the payment of managerial remuneration before obtaining the approval in the general meeting. Before the amendment of the provision came into force, u/s 197 of the Act required approval of the company in a general meeting for payment of managerial remuneration in excess of 11 percent of the net profits.
- PROHIBITS REGISTERED VALUER TO UNDERTAKE VALUATION OF ANY ASSET UNDER SECTION 247
Govt. has further announced that registered valuer cannot undertake valuation of any asset in which he has direct or indirect interest or becomes so interested at any time during three years prior to his appointment as valuer or three years after valuation of assets was conducted by him. Previously, u/s Section 247 of the Act, prohibited a registered valuer from undertaking valuation of any assets in which he has a direct or indirect interest or becomes so interested at any time during or after the valuation of assets.