Sections 374, 379, 384, 391, 403 and 406 of Companies Amendment Act 2017
The Companies (Amendment) Act, 2017 amended important provisions of the Companies Act, 2013 concerning conversion and registration of entities, foreign companies, corporate social responsibility provisions applicable to foreign companies, closure of business by certain foreign companies, filing fees and Nidhis. This article reproduces the substance of sections 76 to 81 of the 2017 Amendment Act and explains their legal context.
Amendment of Section 374 of the Companies Act, 2013
What Section 374 deals with: Section 374 forms part of the provisions governing registration of existing entities as companies under Part I of Chapter XXI of the Companies Act, 2013. It specifies obligations and consequences connected with such registration.
Section 76 of the Companies (Amendment) Act, 2017: In section 374 of the principal Act, after clause (d), a proviso was inserted to provide that, upon registration as a company under this Part, a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 is deemed to have been dissolved under that Act without any further act or deed.
The amendment therefore provides a statutory consequence for an LLP that registers as a company under the relevant Part: separate dissolution formalities under the LLP legislation are not required for the deemed dissolution contemplated by the proviso.
Amendment of Section 379 of the Companies Act, 2013
What Section 379 deals with: Section 379 is in Chapter XXII, which regulates companies incorporated outside India. It determines the application of specified provisions of the Companies Act, 2013 to foreign companies.
Section 77 of the Companies (Amendment) Act, 2017: Section 379 was renumbered as sub-section (2), and a new sub-section (1) was inserted. The inserted provision applies sections 380 to 386 and sections 392 and 393 to all foreign companies, while empowering the Central Government, by an Order published in the Official Gazette, to exempt a specified class of foreign companies from any of those provisions. A copy of every such Order is to be laid before both Houses of Parliament.
The amendment broadened and clarified the statutory framework applicable to foreign companies while retaining a power for class-based exemptions by the Central Government.
Amendment of Section 384 of the Companies Act, 2013
What Section 384 deals with: Section 384 applies specified provisions concerning debentures, annual returns, corporate social responsibility, charges and books of account to foreign companies, subject to the Act and applicable rules.
Section 78 of the Companies (Amendment) Act, 2017: In section 384(2), after the reference to section 92, the words and figures referring to section 135 were inserted.
Section 135 is the corporate social responsibility provision. The amendment therefore expressly brought section 135 within section 384(2), subject to the exceptions, modifications and adaptations permitted by the statutory framework for foreign companies.
Amendment of Section 391 of the Companies Act, 2013
What Section 391 deals with: Section 391 concerns the application of specified liability and winding-up provisions to foreign companies within Chapter XXII.
Section 79 of the Companies (Amendment) Act, 2017: Section 391(2) was substituted to provide that, subject to section 376, Chapter XX applies mutatis mutandis to closure of the place of business in India of a foreign company as if it were a company incorporated in India where that foreign company has raised monies through an offer or issue of securities under Chapter XXII which have not been repaid or redeemed.
Mutatis mutandis means that the relevant provisions apply with the necessary changes required by the different context.
Amendment of Section 403 of the Companies Act, 2013
What Section 403 deals with: Section 403 governs fees and additional fees for documents, facts or information required or authorised to be submitted, filed, registered or recorded under the Companies Act, 2013.
Section 80 of the Companies (Amendment) Act, 2017: The first and second provisos to section 403(1) were substituted. For documents, facts or information under sections 92 or 137 filed after the prescribed period, the amendment provided for an additional fee of not less than one hundred rupees per day, with scope for different amounts for different classes of companies. For other filings, it provided for such additional fee as may be prescribed. It also introduced a higher-additional-fee consequence for repeated defaults. Section 403(2) was substituted so that payment of fee and additional fee does not remove the penalty or punishment otherwise provided for failure or default.
Later change to Section 403
The third proviso to section 403(1) was later substituted by section 56 of the Companies (Amendment) Act, 2020. With effect from 1 July 2022, repeated default in submitting, filing, registering or recording such prescribed document, fact or information attracts such higher additional fee as may be prescribed, without prejudice to other legal action or liability. Accordingly, the 2017 text should not be treated as the complete present-day text of section 403.
Substitution of Section 406 - provisions relating to Nidhis
What Section 406 deals with: Section 406 provides the statutory framework for Nidhis or Mutual Benefit Societies and the Central Government's power to regulate the application of provisions of the Companies Act, 2013 to them. Nidhis are also governed by the Nidhi Rules, 2014, as amended from time to time.
Section 81 of the Companies (Amendment) Act, 2017: Section 406 was substituted. The substituted provision defines a "Nidhi" or "Mutual Benefit Society" by reference to a company declared as such by the Central Government through notification in the Official Gazette. It authorises the Central Government, by notification, to direct that specified provisions of the Companies Act do not apply, or apply with stated exceptions, modifications and adaptations, to a Nidhi or Mutual Benefit Society. It also prescribes parliamentary scrutiny of proposed notifications and requires issued notifications to be laid before each House of Parliament.
For current compliance, the Nidhi Rules, 2014 and later amendments are important in addition to section 406 itself. In particular, later rule changes introduced and revised the declaration process for companies seeking Nidhi status and related filing requirements.
Official legal resources
For authoritative verification, refer to the Companies (Amendment) Act, 2017 published by the Ministry of Corporate Affairs, the Companies Act, 2013 on the MCA website, and the Companies Act, 2013 resources on India Code.