The Companies (Meetings of Board and its Powers) Amendment Rules, 2025.
1. Context and Authority
The notification is issued under the powers granted by Sections 173, 177, 178, and 186, read with Section 469 of the Companies Act, 2013. These sections relate to:
- Section 173: Meetings of the Board of Directors, outlining requirements for board meetings, such as frequency, quorum, and procedures.
- Section 177: Audit Committee, which mandates certain companies to constitute an audit committee and defines its roles and responsibilities.
- Section 178: Nomination and Remuneration Committee and Stakeholders Relationship Committee, which deal with the appointment of directors, remuneration policies, and addressing stakeholder grievances.
- Section 186: Loans and investments by companies, which regulates inter-corporate loans, guarantees, and investments.
- Section 469: Power of the Central Government to make rules for carrying out the provisions of the Companies Act, 2013.
The notification amends the Companies (Meetings of Board and its Powers) Rules, 2014, which provide detailed procedural guidelines for board meetings, committee functions, and other powers of the board.
2. Title and Effective Date
- Title: The amendments are officially named the Companies (Meetings of Board and its Powers) Amendment Rules, 2025.
- Effective Date: The rules will come into effect on the date of their publication in the Official Gazette, which is the official publication of the Government of India used to notify laws, rules, and amendments.
3. Specific Amendment
The amendment modifies Rule 11, Sub-rule (2) of the Companies (Meetings of Board and its Powers) Rules, 2014. The changes are as follows:
a. Substitution of Text
- The original phrase “shall include” in Rule 11(2) is replaced with “shall include – (i)”.
- This change introduces a numbered list format, indicating that the existing provision will now be the first item in a list of inclusions.
b. Addition of New Clause
- After the phrase “ordinary course of its business”, a new clause is inserted, adding a second item to the list. The new clause reads:
- “(ii) – with regard to a Finance Company registered with the International Financial Services Centres Authority, ‘business of carrying out activity of lending in the form of loans, commitments and guarantees, credit enhancement, securitisation, financial lease, and sale and purchase of portfolios as specified in sub-clause (a), or carrying out activity of Global or Regional Corporate Treasury Centre as specified in sub-clause (e) of clause (ii) of sub-regulation (1) of regulation 5 of IFSCA (Finance Company) Regulations, 2021 in the ordinary course of its business’”.
4. Explanation of the Amendment
The amendment expands the scope of Rule 11(2) to explicitly include specific activities of Finance Companies registered with the International Financial Services Centres Authority (IFSCA) as part of the “ordinary course of business.” This is significant because certain restrictions or requirements under the Companies Act, 2013, and its rules may not apply to activities conducted in the ordinary course of business. By clarifying these activities, the amendment provides regulatory clarity for finance companies operating in International Financial Services Centres (IFSCs), such as the GIFT City IFSC in Gujarat, India.
Key Points of the Added Clause:
- Finance Companies under IFSCA: The amendment applies to finance companies registered with the IFSCA, the regulatory body governing financial services in IFSCs in India.
- Specified Activities:
- Lending Activities: These include providing loans, commitments, guarantees, credit enhancement (e.g., improving the creditworthiness of a borrower), securitization (pooling assets to create financial instruments), financial leasing, and buying/selling portfolios. These activities are referenced from sub-clause (a) of the IFSCA (Finance Company) Regulations, 2021.
- Global or Regional Corporate Treasury Centre: These activities, as specified in sub-clause (e) of the IFSCA regulations, involve managing treasury functions, such as liquidity management, funding, and risk management, for global or regional operations.
- Ordinary Course of Business: By explicitly including these activities in the definition of the “ordinary course of business,” the amendment ensures that these activities are treated as routine operations for IFSCA-registered finance companies, potentially exempting them from certain restrictions under Section 186 (e.g., limits on loans and investments) or other related provisions.
Reference to IFSCA Regulations:
The amendment refers to Regulation 5(1)(ii) of the IFSCA (Finance Company) Regulations, 2021, specifically:
- Sub-clause (a): Defines permissible lending activities for finance companies in IFSCs.
- Sub-clause (e): Defines activities related to operating as a Global or Regional Corporate Treasury Centre.
5. Implications of the Amendment
- Regulatory Clarity: The amendment provides clarity for IFSCA-registered finance companies by explicitly defining their core activities as part of the “ordinary course of business.” This reduces ambiguity in compliance with the Companies Act, 2013.
- Facilitation of IFSC Operations: The change supports the growth of IFSCs, such as GIFT City, by aligning corporate governance rules with the specialized financial activities conducted in these centers.
- Ease of Doing Business: By categorizing lending and treasury activities as routine, the amendment may reduce regulatory hurdles (e.g., board approvals or shareholder resolutions) for such activities, making it easier for finance companies to operate.
- Compliance with Section 186: Since Section 186 imposes restrictions on loans, guarantees, and investments by companies, this amendment ensures that the specified activities of IFSCA-registered finance companies are not unnecessarily restricted, as they are considered part of their normal operations.
6. Background and Note
- Principal Rules: The Companies (Meetings of Board and its Powers) Rules, 2014 were originally published on March 31, 2014, via notification G.S.R. 240(E).
- Last Amendment: The rules were last amended on June 15, 2021, via notification G.S.R. 409(E). The 2025 amendment builds on these existing rules.
- Publication: The amendment will be published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), which is the standard channel for notifying changes to rules under the Companies Act.
7. Broader Context
- International Financial Services Centres (IFSCs): IFSCs like GIFT City are designed to attract global financial institutions by offering a business-friendly regulatory environment, tax incentives, and access to international markets. The IFSCA, established under the International Financial Services Centres Authority Act, 2019, regulates financial services in IFSCs.
- Alignment with Global Standards: By recognizing specialized financial activities (e.g., securitization, treasury operations), the amendment aligns India’s corporate laws with global financial practices, making IFSCs more competitive.
- Support for Financial Innovation: The inclusion of activities like credit enhancement and securitization reflects the government’s intent to foster financial innovation in IFSCs.
8. Conclusion
The Companies (Meetings of Board and its Powers) Amendment Rules, 2025, modify Rule 11(2) to explicitly include specific activities of IFSCA-registered finance companies in the definition of “ordinary course of business.” This amendment supports the operational efficiency of finance companies in IFSCs, reduces regulatory ambiguities, and aligns corporate governance rules with the specialized nature of financial activities in these centers. It will take effect upon publication in the Official Gazette and is part of ongoing efforts to strengthen India’s financial services ecosystem, particularly in IFSCs like GIFT City.
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