Provisions of Sections 14 and 15 the Companies (Amendment) Act, 2015 (21 of 2015), that amend Sections 143 and 177, respectively, of the Companies Act, have come into force from the 14-12-2015. MCA Notification S.O. 3388(E), dated December 14, 2015 has been issued in this regard.
Section 13 of the Amendment Act amends sub-section (12) of Section 143 which now provides that if the fraud being reported by the auditor involves amount less than the specified amount, the auditor is required to report the matter to the audit committee or to the Board. Further, it is provided that auditors, who have filed a report under this sub-section to the audit committee or the Board but not to the Central Government, shall disclose the details of the fraud in the Board’s report. Sub-section (12) prior to this amendment provided for reporting only to the Central Government by the auditor if he in course of performing his duty, has reason to believe that there has been an act of fraud of such prescribed amounts committed by the Company or any of its employees. Section 14 of the Amendment Act provides an additional proviso to Section 177(4)(iv) stating that audit committee may make omnibus approval for related party transactions proposed to be entered into by the company subject to such conditions as may be prescribed. Sub-section 177(4) provides that every audit committee shall act in accordance with the terms of reference in writing of the Board. It includes subsequent modifications of transactions with related parties.
It may be noted that consequential amendments have also been made in Companies (Audit and Auditors) Rules, 2014 by Notification No. G.S.R. 972(E), dated 14-12-2015, and to the Companies (Meetings of Board and its Powers) Rules, 2014. Amendment to the Audit Rules, 2014 while revising Rule 13 also considerably reduces the time within which the matter has to be reported to the Central Government/audit committee.