THE COMPANIES (AMENDMENT) BILL, 2003

 a BILL further to amend the Companies Act, 1956.

 Be it enacted by Parliament in the Fifty-fourth Year of the Republic of India as
follows:—

1. (1) This Act may be called the Companies (Amendment) Act, 2003.

(2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint:

Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the commencement of that provision.

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

(a) for clause (1A), the following clauses shall be inserted, namely:—  

‘(1A) “accounting standards” means the standards of accounting, recommended by the Institute of Chartered Accountants of India, constituted under the Chartered Accountants Act, 1949, and which may be prescribed by the Central Government in consultation with the National Advisory Committee on Accounting Standards constituted under sub-section (1) of section 210A;

(1AA) “alter” and “alteration” shall include the making of additions and omissions;’;        

(b) for clause (8), the following clause shall be substituted, namely:—

‘(8) “book and paper” and “book or paper” include accounts, deeds, vouchers, writings and documents, maintained on paper or computer network, floppy, diskette, magnetic cartridge tape, CD-rom or any other computer readable media;’;     

(c) after clause (9), the following clauses shall be inserted, namely :—

‘(9A) “chartered accountant” means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;

(9B) “chief accounts officer” means the chief accounts officer, of a company appointed under section 215A, by whatever name called;’;

(d) after clause (10A), the following clause shall be inserted, namely:—

‘(10B) “cost accountant” means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;’;

(e) clause (14) shall be omitted;     

(f) for clause (15), the following clause shall be substituted, namely:—

‘(15) “document” includes summons, notice, requisition, order, other legal process, and registers, whether issued, sent or kept in pursuance of this Act or any other law for the time being in force, whether maintained in any medium capable of being retrieved by any electronic means or in any other manner;’;

(g) for clause (19AA), the following clauses shall be substituted, namely:—

‘(19AA) “independent director” means a director referred to in section 252A;’

(19AAA) “industrial company” means a company which owns one or more industrial undertakings;

(h) for clause (19AB), the following clause shall be substituted, namely:—

‘(19AB) “industrial undertaking” means any undertaking, pertaining to any of the industries specified for the time being in the First Schedule to the Industries (Development and Regulation) Act, 1951, carried on in one or more factories by any company; and includes ancillary industrial undertaking as defined in clause (aa) of section 3 of that Act but does not include a small-scale industrial undertaking as defined in clause (j) of that section;’.

(i) for clause (22), the following clause shall be substituted, namely:—

‘(22) “issued generally”, in relation to a prospectus or an abridged prospectus, or any other like document, means issued to persons irrespective of their being existing members or debenture-holders of the body corporate to which the prospectus or abridged prospectus or such other like document relates;’;

(j) clause (27) shall be omitted;     

(k) in clause (30), for the words “or secretary”, the words “secretary or chief accounts officer” shall be substituted;

(l) for clause (33), the following clause shall be substituted, namely:—

‘(33) “prescribed” means prescribed by rules made under this Act;’;

(m) for clause (36), the following clause shall be substituted, namely:—

‘(36) “prospectus” means any document described or issued as a prospectus and includes any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate, but does not include an information memorandum or like document issued prior to the issue of a prospectus;’;

(n) after clause (39), the following clause shall be inserted, namely:—

‘(39A) “register” means the register of members of a company and includes the register of debenture-holders or holders of other securities maintained on paper or computer network, floppy, diskette, magnetic cartridge tape, CD-rom or any other computer readable media;’.

3. In section 3 of the principal Act, after sub-section (5), the following proviso shall be inserted, namely:—

Provided that in case the private company or a public company,—

(i) fails to enhance its paid up capital in accordance with the provisions of this section; or

(ii) is not carrying on business or in operation referred to in section 560, the liability of every director or manager or shareholder of such company shall beocme unlimited.

4. In section 4 of the principal Act,—

(a) in sub-section (1),—

(i) for clause (b), the following clause shall be substituted, namely:—

“(b) that the other exercises or controls more than one-half of its total voting power in a case where it has issued securities and such securities have the same voting rights as equity shares;or”;

(ii) for clause (c) and Illustration, the following clause shall be substituted, namely:—

“(c) that the other holds more than one-half in value of its paid-up capital, in any other case.”;

(b) after sub-section (1), the following sub-section shall be inserted, namely:—

“(1A) No company which is a subsidiary of another company shall, after the commencement of the Companies (Amendment)Act, 2003, become a holding company.”;

(c) in sub-section (7), for the words “the entire share capital”, the words “not less than ninety-nine per cent. of the share capital” shall be substituted.

5. In section 5 of the principal Act, after clause (b), the following clauses shall be inserted, namely:—

“(ba) any other director in respect of contravention of any of the provisions of this Act which had been committed with his consent or connivance or is attributable to any neglect on his part;

(bb) the chief accounts officer;

(bc) every employee, who is in receipt of remuneration more than the remuneration drawn by the managing director or any whole-time director in the company in which such an employee is employed and who himself or along with his spouse and dependent children holds not less than two per cent. of the equity share capital of the company;

(bd) the share transfer agents, bankers, registrars to the issue, merchant bankers, in respect of the issue or transfer of any securities of the company;

(be) debenture trustee;”.   

6. In section 10 of the principal Act, in sub-section (2), clause (b) shall be omitted.

7. In section 11 of the principal Act,—

(a) in sub-section (1), for the words “some other Indian law”, the words “any other law for the time being in force” shall be substituted;

(b) in sub-section  2,—

(i) for the words “some other Indian Law”, the words “any other law for the time being in force” shall be substituted;

(ii) the following proviso shall be inserted, namely:—

“Provided that in the case of an association of persons or partnership formed for the purpose of carrying on the profession of advocates, chartered accountants, cost accountants, company secretaries, doctors, architects or such other profession, as may be specified, by notification in the Official Gazette in this behalf by the Central Government, this sub-section shall have effect as if for the words “twenty persons”, the words “fifty persons” had been substituted.”;

(c) in sub-section (5), for the words “ten thousand rupees”, the words “fifty thousand rupees” shall be substituted.

8. For section 13 of the principal Act, the following section shall be substituted, namely:—             

“13. (1) The memorandum of every company formed after the companies (Amendment) Act, 2003 shall state—

(a) the name of the company with “Limited” as the last word of the name in the case of a public limited company, and with “Private Limited” as the last words of the name in the case of a private limited company;

(b) the State in which the registered office of the company is to be situate;

(c) (i) the main objects of the company to be pursued by the company; and

(ii) other objects of the company not included in sub-clause (i);

(d) that the liability of the members is limited by shares or by guarantee and, if so, it shall state that the liability of its members is limited;

(e) the share capital of the company;

(f) the name of each subscriber, his address, description and occupation, if any, who shall sign in the presence of at least one witness who shall attest the signature and likewise add his address, description and occupation, if any.

(2) The memorandum of a company limited by guarantee shall also state that each member undertakes to contribute to the assets of the company in the event of its being wound up while he is a member or within one year after he ceases to be a member, for payment of the debts and liabilities of the company, or of such debts and liabilities of the company as may have been contracted before he ceases to be a member, as the case may be, and of the costs, charges and expenses of winding up, and for adjustment of the rights of the contributories among themselves, such amount as may be required, not exceeding a specified amount.

(3) In the case of a company having a share capital—

(a) unless the company is an unlimited company, the memorandum shall state the amount of share capital with which the company is to be registered and the division thereof into shares of a fixed amount;

(b) no subscriber of the memorandum shall take less than one share; and

(c) each subscriber of the memorandum shall write opposite his name the number of shares he takes.

(4) There shall be affixed two clear copies of recent photographs of all subscribers to the memorandum and the witness and each such photograph shall be signed by the subscriber and the witnesses alongwith proof of the identity of the subscribers”.

(5) The memorandum shall—

(a) be printed electronically or otherwise as may be prescribed;

(b) be divided into paragraphs numbered consecutively.

9. Sections 15, 15A and 15B of the principal Act shall be omitted.                

10. In section 22 of the principal Act, in sub-section (1), for the proviso, the following provisos shall be substituted, namely:—

“Provided that the Central Government may, on the ground of the security of the State or public interest, direct any company, within twelve months of its first registration or at any time thereafter, to change its name and such company shall forthwith change its name:

Provided further that no application under clause (ii) made by a registered proprietor of a trademark after five years of coming to notice of registration of the company shall be considered by the Central Government.”.               

11. In section 25 of the principal Act,—

(a) in sub-section (1), in clause (a), for the words “useful object, and”, the words “useful object, not confined to one state, and” shall be substituted;

(b) for sub-section (6), the following sub-section shall be substituted, namely:—

“(6) The Central Government may, by general or special order and to the extent specified in such order, exempt a body to which a licence is granted under this section, from such of the provisions of this Act as may be specified therein.”.   

12. For section 30 of the principal Act, the following section shall be substituted,
namely:—             

“30. (1) Articles shall—

(a) be printed, either electronically or in such manner, as may be prescribed;

(b) be divided into paragraphs numbered consecutively;

(c) state the name of each subscriber, his address, description and occupation, if any, who shall sign in the presence of at least one witness who shall attest the signature and shall likewise add his address, description and occupation, if any.

(2) There shall be affixed two clear copies of recent photographs of all the subscribers of the memorandum and the witness and each such photograph shall be signed by the subscriber and the witnesses alongwith proof of the identity of the subscribers.”.

13. In section 32 of the principal Act,—

(a) in sub-section (1), in clause (b), after the words “under this Act”, the words “as an unlimited company” shall be inserted;

(b) in sub-section (3), for the words “limited company”, the words “limited company or registration of a limited company as an unlimited company” shall be substituted.

14. In section 39 of the principal Act,—

(a) in sub-section (1), for the words “a fee of one rupee”, the words “such fee as may be prescribed” shall be substituted;

(b) in sub-section (2), for the words “five hundred rupees”, the words “one thousand rupees” shall be substituted.                    

15. In section 40 of the principal Act, in sub-section (2), for the words “one hundred rupees”, the words “one thousand rupees” shall be substituted.         

16. In section 42 of the principal Act,—

(a) in sub-section (3), the words “either at the commencement of this Act or” shall be omitted;

(b) after sub-section (3), the following sub-section shall be inserted, namely:—

“(3A) Where a subsidiary company continues to be a member of a holding company under sub-section (3), nothing in this section shall prejudice its rights to be allotted bonus shares of such holding company.”.         

17. In section 51 of the principal Act,—

(a) for the words “leaving it at its registered office”, the words “leaving it at its registered office or by means of electronic mode or by such other means as may be prescribed” shall be substituted;

(b) in the proviso, for the words “floppies or discs”, the words “floppies or discs or by such other means as may be prescribed” shall be substituted.                    

18. In section 52 of the principal Act, for the words “ for, him at his office”, the words “for, him at his office or by such other means as may be prescribed” shall be substituted.    

19. For section 53 of the principal Act, the following section shall be substituted, namely:—             

“53. (1) A document may be served by a company on any member or a holder of any other security thereof either personally, or by sending it in the manner provided in  section 51 to his registered address, or if he has no registered address in India, to the address, if any, within India supplied by him to the company for the giving of notices to him or by advertising it in a newspaper circulating in the neighbourhood of the registered office of the company.

(2) Where a document is sent by post,—

(a) service thereof shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the document:

Provided that where a member or a holder of any other security has intimated to the company in advance that documents should be sent to him under a certificate of posting or by registered post with or without acknowledgment due and has deposited with the company a sum sufficient to defray the expenses of doing so, service of the documents shall not be deemed to be effected unless it is sent in the manner intimated by the member; and

(b) such service shall be deemed to have been effected—

(i) in the case of a notice of a meeting, at the expiration of forty-eight hours after the letter containing the same is posted; and

(ii) in any other case, at the time at which the letter would be delivered in the ordinary course of post.

(3) A document advertised under sub-section (1) shall be deemed to be duly served on the day, on which the advertisement appears, on every member or a holder of any security of the company who has no registered address in India and has not supplied to the company an address within India for giving of notices to him.

(4) A document may be served by the company on the joint-holders of a security by serving it on the joint-holder named first in the register in respect of the security.

(5) A document may be served by the company on the person or persons entitled to a security in consequence of the death or insolvency of a member by sending it through the post in a pre-paid letter addressed to him or them by name, or by the title of representatives of the deceased, or assignees of the insolvent, or by any like description, at the address, if any, in India supplied for the purpose by the persons claiming to be so entitled, or until such an address has been so supplied, by serving the document in any manner in which it might have been served if the death or insolvency had not occurred.”.

 20. In section 56 of the principal Act,—

(a) in sub-section (2), for the words “shares in or debentures of”, the words “securities of” shall be substituted;

(b) after sub-section (2), the following sub-section shall be inserted, namely:—

“(2A) Where any prospectus is published as a newspaper advertisement, or in any other manner, it shall be in the form of an abridged prospectus.”;

(c) in sub-section (3),—

(i) for the words “for shares in or debentures of”, the words “for securities of” shall be substituted;

(ii) for the words “shares or debentures”, the word “securities” shall be substituted;

(d) for sub-section (5), the following shall be substituted, namely:—

“(5) This section shall not apply—

(a) to the issue to the existing members or the holders of securities of a company of a prospectus, letter of offer or form of application relating to securities of the company, whether an applicant for securities will or will not have the right to renounce the securities in favour of other persons; or

(b) to the issue of a prospectus or form of application relating to securities which are, or are to be, in all respects uniform with securities previously issued and for the time being dealt in or quoted on a recognised stock exchange,

but, subject as aforesaid, this section shall apply to a prospectus or a form of application, whether issued on or with reference to the formation of a company or subsequently.”

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