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The Lok Sabha on Saturday i.e. 19th September 2020 passed a bill to further amend around 48 sections of the Companies Act, 2013 by decriminalizing various non-compoundable offenses in case of defaults, but not involving frauds, omitting imprisonment for various offenses which were considered procedural and technical in nature. This was done with an objective to promote ease of doing business in the country

The above-mentioned decriminalization of various penal provisions under the Companies Act will also help small companies by reducing the litigation burden on them.

Highlights of amendments under the Companies (Amendment) Bill, 2020

The Highlights of the amendments are as follow:

S. No.

Clause No. of  the Bill

Section of the Act and Title

Proposed Amendment

1

Clause 2

Definition of Listed company  clause (52) of section 2

To insert a new proviso that enables the Central Government to exclude a certain class of companies, which have listed or intend to list such class of securities, as may be prescribed in consultation with SEBI, from the

definition of listed companies.

2

Clause 3

Formation of Companies with Charitable Objects, etc.

sub-section (11) of section 8

To omit the punishment of imprisonment in relation to an officer who is in default for the offense mentioned therein.

3

Clause 4

Rectification of Name of Company

clause (b) of sub-section

(1) of section 16

sub-section (3) of section 16

To reduce the time limit of compliance of change in name of the company in case of the resemblance of name to a registered trademark from six months to three months for the direction provided by the Central Government in the provision.

The amendment proposes to provide for allotment of a new name to the company by the Central Government, in case the company is in non-compliance with section 16(1) of the Act. The amendment proposes the deletion of imposing fine for non-compliance for such

default.

4

Clause 5

Public Offer and Private Placement

To insert new sub-sections

(3) and (4) in section 23

To allow a class of public companies to list certain class of securities on stock exchanges in permissible foreign jurisdictions.

To empower the Central Government to exempt, by notification, any class or classes of public companies referred to in above-inserted section from any of the provisions of Chapter III, Chapter IV, section 89, section 90

or section 127 of the Act.

5

Clause 6

Matters to be Stated in Prospectus

sub-section (9) of section 26

To omit the punishment of imprisonment in relation to every person who is knowingly a party to the issue of a prospectus in contravention of the said section.

6

Clause 7

Securities to be Dealt with in Stock Exchanges

sub-section (5) of section 40

To remove the punishment of imprisonment in case of any default in complying with the provisions of the said section.

7

Clause 8

Variation of

Shareholders' Rights.

omit subsection (5) of section 48

To remove the penal provisions in case of any default in complying with said section.

8

Clause 9

Transfer and

Transmission of Securities

sub-section (6) of section 56

To amend subsection thereby imposing a penalty in place of a fine of rupees fifty thousand for the company and its officers in default in case of failure to comply with sub-sections (1) to (5).

9

Clause 10

Rectification of Register of Members

to omit sub-section (5) of section 59

To remove the penal provisions in case of any default in complying with the order of the Tribunal under the said section

10

Clause 11

Further Issue of Share Capital

sub-clause (i) of clause (a) of sub-section (1) of section 62

To enable the Central Government to provide by rules, such days lesser than fifteen for deeming the decline of the offer made under the said provision.

The amendment reduces the range of time limit from the date of the offer within which the offer, if not accepted, shall be deemed to

have been declined.

11

Clause 12

Notice to be given to Registrar for Alteration of Share Capital

sub-section (2) of section 64

To modify the amount of penalty provided therein in case of default made in complying with sub-section (1).

12

Clause 13

Reduction of Share Capital

to omit sub-section (11) of section 66

To remove the penal provisions in case of any default in complying with sub-section (4) relating to the publication of the order of confirmation of the reduction of share capital

by the Tribunal in such manner, as the Tribunal may direct.

13

Clause 14

Power of Company to Purchase its Own

Securities

sub-section (11) of section 68

To omit the punishment of imprisonment in

relation to an officer of the company who is in default for the offense specified therein.

14

Clause 15

Debentures

to omit sub-section (11) of section 71

To remove the penal provisions in case of any default by an officer of the company in complying

with the order of the Tribunal under the said section.

15

Clause 16

Punishment for Contravention

to substitute sub-section

(1) of section 86

To omit the punishment of imprisonment in relation to an officer of the company who is in default and reduced penalty in place of fine, in case of failure to comply with the provisions

of Chapter VI of the Act.

16

Clause 17

Register of Members, etc.

to substitute sub-section

(5) of section 88 of the Act

To reduce penalties in place of fine, in case of failure to comply with the provisions of subsections (1) and (2).

17

Clause 18

Declaration in Respect of Beneficial Interest in any Share

to substitute sub-sections

(5) and (7) and insert subsection (11) in section 89

To provide for a penalty in place of fine, for failure in making a declaration or in the filing of a return, as the case may be, under sub-section (1), (2), (3), or (6).

To insert a new sub-section (11) to enable the Central Government to notify a class or classes of persons who shall be unconditionally or subject to such conditions, as may be specified in such notification, be

exempted from complying with the said section, except sub-section (10).

18

Clause 19

Register of significant beneficial owners in a company

to substitute sub-sections

(10) and (11) of section 90

To provide for a penalty in place of fine, for failure in making a declaration, maintaining the register, filing of information, or taking necessary steps, as the case may be, in subsections (1), (2), (4), or (4A).

19

Clause 20

Annual Return

to amend sub-section (5) and (6) of section 92

To modify the amount of penalty provided therein in case of default made in complying sub-section (4) of the said section as per the amendment to sub-section (5).

A PCS certifying annual return, not in conformity with the section or rules made thereunder shall be liable to a penalty in place of a fine of two lakh rupees as per amendment

to sub-section (6).

20

Clause 21

Proxies

sub-section (5) of section 105

To reduce penalties in place of fine in the case, invitations for proxies are issued at expense of the company.

21

Clause

22

Resolutions and

Agreements to be Filed

to substitute sub-section

  1. and amend sub-section
  2. of section 117

To modify the amount of penalty for the company

and its officers in default for failure to comply

with subsection (1) of said section.

To substitute the second proviso to clause (g) of sub-section (3) of the said section to enable the Central Government to exempt any class of non-banking financial companies registered under Chapter IIIB of the Reserve Bank of India Act, 1934 and any class of housing finance companies registered under the National Housing Bank Act, 1987 from the filing of resolutions passed to grant loans or give guarantees or to provide security in respect of loans under clause (f) of sub-section (3) of section 179 of the Act in the ordinary course

of their business.

22

Clause 23

Unpaid Dividend Account.

to substitute sub-section

(7) of section 124

To modify penalty in place of fine for the company and its officers in default for failure to comply with the provisions of the said section.

23

Clause 24

Books of Account, etc., to be kept by Company

To omit the punishment of imprisonment in relation to an officer who is in default for the

offense mentioned therein.

   

sub-section (6) of section

128

 

24

Clause 25

Periodical financial results

Insertion of a new section 129A

To empower the Central Government to provide by rules such class or classes of unlisted companies to prepare periodical financial results of the company, audit or limited review thereof, and their filing with the Registrar within thirty days from the end of that period as specified in the rules.

25

Clause 26

Financial Statement,

Board’s Report, etc.

to substitute sub-section

(8) of section 134

To reduce penalty in place of fine on the company and its officer in default and omit the punishment of imprisonment in relation to its

officers in default in case of failure in complying with said section.

26

Clause 27

Corporate Social Responsibility

sub-section (5) of section 135

to substitute sub-section

(7) of the said section

to insert a new subsection (9)

Proviso inserted thereto to allow companies, which have spent an amount in excess of the requirement provided under the said subsection, to set off such excess amount out of their obligation in the succeeding financial years in such manner as may be provided by rules.

To provide that if a company defaults in complying with sub-sections (5) or (6) of the said section, such company, and every officer

of such company who is in default shall be

liable to a penalty in place of a fine.

To provide that the requirement of the constitution of Corporate Social Responsibility Committee shall not be applicable, in case the amount required to be

spent under sub-section (5) of the said section does not exceed fifty lakh rupees.

27

Clause 28

Copy of Financial Statement to be Filed with Registrar

sub-section (3) of section 137

To modify the amount of penalty in case of default made in complying with sub-section

(1) or sub-section (2) of the said section.

28

Clause 29

Removal, Resignation of Auditor and Giving of Special Notice

sub-section (3) of section 140

To modify the amount of penalty, in case of default made in complying with sub-section

(2) of the said section by the auditor

29

Clause 30

Powers and Duties of Auditors and Auditing Standards

to substitute sub-section

(15) of section 143

To modify penalty in place of fine on an auditor, cost accountant, or company secretary in practice who fail to comply with subsection (12) of the said section. Specific

penalties proposed for listed and unlisted companies.

30

Clause 31

Punishment for Contravention

sub-section (1) and (2) of

section 147

To omit the punishment of imprisonment in relation to an officer who is in default for the offense mentioned therein.

To omit the reference of section 143 mentioned in sub-section (2).

31

Clause 32

Company to have Board of Directors

sub-section (9) of section 149

To insert a new proviso in sub-section (9) which provides that an independent director may receive remuneration if a company has no profits or inadequate profits in accordance

with Schedule V of the Act.

32

Clause 33

Number of Directorships

to substitute sub-section

(6) of section 165

To modify the amount of penalty, in case of a default committed under the said section.

33

Clause 34

Vacation of Office of Director

to amend sub-section (2) of section 167

To omit the punishment of imprisonment for the offense mentioned therein.

34

Clause 35

Punishment

to substitute section 172

To modify penalty in place of fine, in case of default in complying with the provisions of Chapter XI of the Act for which no specific

punishment or penalty has been provided.

35

Clause 36

Nomination and Remuneration

Committee and Stakeholders Relationship Committee

sub-section (8) of section 178

To modify the penalty in place of fine and omit the punishment of imprisonment in relation to an officer of the company in case of any default in compliance with sections 177.

36

Clause 37

Disclosure of Interest by Director

sub-section (4) of section 184

To reduce penalty in place of fine in case of default of sub-sections (1) and (2) and deletion of provision for imprisonment.

37

Clause 38

Investments of Company to be Held in its Own Name

to substitute sub-section

(4) of section 187

To reduce penalty in place of fine in case of default by a company or officer of the company in complying with the provisions of the said section and deletion of provision for imprisonment.

38

Clause 39

Related Party Transactions

clause (i) and (ii) of subsection (5) of section 188

To replace the punishment for imprisonment or fine with a penalty and to amend clause (ii) of the said subsection for a penalty.

39

Clause 40

Overall Maximum Managerial Remuneration and Managerial Remuneration in Case of Absence or Inadequacy of Profits

sub-section (3) of section 197

To make provision that if a company fails to make profits or makes inadequate profits in a financial year, any non-executive director of such company, including an independent director, shall be paid remuneration in accordance with Schedule V of the Act.

40

Clause 41

Secretarial Audit for Bigger Companies

sub-section (4) of section 204

To reduce penalties in place of fine for contravention of the provisions of the said section.

41

Clause 42

Merger and

Amalgamation of Companies.

to substitute sub-section

(8) of section 232

To modify penalty in place of fine and deletion of provision for imprisonment on failure to comply with subsection (5) of the said section.

42

Clause 43

Powers of Tribunal

sub-section (8) of section 242

To omit the punishment of imprisonment in relation to an officer in default for the offense mentioned therein.

43

Clause

44

Consequence of

Termination or

Modification of Certain Agreements

sub-section (2) of section 243

To omit the punishment of imprisonment in

relation to an officer in default for the offense

mentioned therein.

44

Clause 45

Valuation by Registered Valuers

sub-section (3) of section 247

To reduce penalty in place of fine and deletion of provision for imprisonment of the valuer in case of contravention of the section.

45

Clause 46

Promoters, Directors, etc., to Cooperate with Company Liquidator.

Deletion of provision for imprisonment for failing to discharge obligations under subsection (1).

   

to substitute sub-section

(2) of section 284

to insert a new sub-section (3)

To provide that when a person required to assist a Company Liquidator under subsection (1) of the section does not do so, then the Company Liquidator may make an application to the Tribunal for necessary directions

     

To provide that the Tribunal may direct such person to comply with the directions of the Company Liquidator.

46

Clause 47

Dissolution of Company by Tribunal.

to substitute sub-section

(3) of section 302

to omit sub-section (4)

To provide that the Tribunal shall forward a copy of the order of dissolution to the Registrar, and direct the Company Liquidator to also forward such copy to the Registrar, who shall record in the register relating to the company a minute of the dissolution of the company.

     

Penal provision on Company Liquidator

making default in forwarding a copy of the order to Registrar is omitted.

47

Clause 48

Prosecution of Delinquent Officers and Members of Company

The omission of penal provision if a person fails or neglects to give assistance required by subsection (5).

   

to omit sub-section (6) of section 342

 

48

Clause 49

Disposal of Books and Papers of Company

Omitting the punishment for imprisonment in relation to a person for the offense mentioned

therein.

   

sub-section (4) of section

347

 

49

Clause 50

Information as to Pending Liquidations

to substitute sub-section

(6) of section 348

to omit sub-section (7).

Deletion of provision for fine and imprisonment.

   

To provide that if a Company Liquidator, who is an Insolvency Professional, is in default in

complying with the provisions of the section, the default will be a contravention of the

Insolvency and Bankruptcy Code, 2016, and the rules and regulations made thereunder.

50

Clause 51

Powers of Tribunal to Declare Dissolution of Company Void.

to substitute sub-section

(2) of section 356

The penal provision relating to making default in forwarding a copy of the order to the Registrar is omitted.

To provide that the Tribunal shall forward a copy of the order to the Registrar, and direct the Company Liquidator or the person on whose application such order was made to

also file a certified copy of the order with the Registrar within thirty days of the order.

51

Clause 52

To insert a new Chapter

Chapter XXIA Producer Companies

To insert a chapter relating to Producer Companies on similar lines as provided in the Companies Act, 1956.

52

Clause 53

Application of Act to Foreign Companies.

to omit the proviso to subsection (1) of section 379

Omitted.

53

Clause 54

Punishment for Contravention

section 392

To omit the punishment of imprisonment in relation to an officer who is in default for the offense mentioned therein.

54

Clause 55

Exemptions under this Chapter

to insert a new section 393A

To empower the Central Government to exempt any class of foreign companies or companies incorporated or to be incorporated outside India, from any of the provisions of Chapter XXII of the Act by notification to be

laid before both Houses of Parliament.

55

Clause 56

Fee for Filing, etc

to substitute the third proviso to sub-section (1) of section 403

To provide that where there is a default on two or more occasions in submitting, filing, registering, or recording of prescribed documents the same shall be done on payment of such higher additional fee as may

be provided by rules.

56

Clause 57

Power of Central Government to Direct Companies to Furnish Information or Statistics.

to substitute sub-section

(4) of section 405

To provide for payment of a penalty in place of fine in case a company fails to comply with an order made under sub-section (1) or subsection (3) of the said section, or furnishes any incorrect information and omission of

provision of imprisonment of the officer in default.

57

Clause

58

Constitution of Appellate

Tribunal.

section 410

Removing the restriction on the number of

Judicial and Technical members that the

Central Government may appoint in the Appellate Tribunal.

58

Clause 59

Benches of Appellate Tribunal

to insert a new section 418A

To provide for the constitution of Benches of the Appellate Tribunal to exercise powers of the Appellate Tribunal and related provisions.

59

Clause 60

Establishment of Special Courts

sub-section (1) of section 435

To provide that the offense under section 452 of the Act shall be excluded from the applicability of section 435 of the Act.

60

Clause 61

Compounding of Certain Offences

to substitute sub-section

(5) of section 441

To provide that if any officer or employee of the company fails to comply with the order of Tribunal or Regional Director or any other officer authorized by the Central Government the maximum amount of fine shall be twice the amount provided in the corresponding section in which the punishment for such

offense is provided and deletion of provision for imprisonment.

61

Clause 62

Lesser penalties for certain companies

to substitute section 446B

To provide for payment of lessor penalty by a start-up company, Producer Company, One Person Company, or small company on failure to comply with provisions of the Act which attract penalties.

62

Clause 63

Punishment Where No Specific Penalty or Punishment is Provided

section 450

To provide for a penalty in place of a fine in the case where a company or any officer of a company or any other person makes contraventions of any provision of the Act for which no penalty

or punishment is provided elsewhere in the Act.

63

Clause 64

Punishment for Wrongful Withholding of Property

to insert a proviso in subsection (2) of section 452

To provide that the imprisonment of officer or employee of the company specified under the said sub-section shall not be ordered in case of wrongful possession or withholding of a dwelling unit is concerned and such officer or employee has not received certain statutory

dues from the company.

64

Clause 65

Adjudication of Penalties

sub-section (3) of section 454

To insert a new proviso to provide that no penalty shall be imposed when such default relates to non-compliance of sub-section (4) of section 92 or sub-section (1) or sub-section

(2) of section 137 and has been rectified either prior to, or within thirty days of, the

issue of the notice by the adjudicating officer.

65

Clause

66

Repeal of Certain

Enactments and Savings

to omit the first proviso to sub-section (1) of section 465

Proviso relating to Producer Companies is

omitted.

 

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, we assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a piece of professional advice and is subject to change without notice. 

 

 

Published by

Alok Purohit
(Proprietor at ALOK PUROHIT & ASSOCIATES)
Category Corporate Law   Report

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