Recent Developments in Companies Act 2013

CS Divesh Goyal 
on 20 August 2019


Process for Approval of the Companies (Amendment) Act, 2019.

Submission of Report by Committee of Government

August, 2018

The Companies (Amendment) Ordinance, 2018

02nd November, 2018

The Companies (Amendment) Ordinance, 2019

12th January, 2019

The Companies (Amendment) Second Ordinance, 2019

21st February, 2019

Approval of proposal to introduce Bill in Parliament by union cabinet

17th July, 2019

Placed before Lok Sabha

25th July, 2019

Passed by Lok Sabha

26th July, 2019

Passed by Rajya Sabha

30th July, 2019

Received Assent of President of India and become Act.

31st July, 2019

IMPACT OF AMENDMENTS

  • Enlarging the jurisdiction of Regional Director.
  • Re-categorized of "Fine as Penalty."
  • De-clogging the NCLT.
  • Corporate Governance relating Reforms.

PURPOSE OF AMENDMENTS

  • Simplification of Compliances and doing away with unnecessary procedures.
  • Lesser regulatory interference and greater self-Regulation
  • Clarity in the provisions of the Act.
  • Encouragement for Startups
  • Strengthen Corporate Governance Standard
  • Strict Action against defaulting Companies
  • Transparency
  • Investor Protection

A. Demat of Shares of Public Limited Companies:

The Ministry of Corporate Affairs in its drive to enhance transparency, investor protection and corporate governance, has notified Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2018 on 10th September 2018 effective from 02nd October, 2018.:-

Dematerialization:

• Dematerialization is the process of converting Physical Securities into electronic format.
• A Shareholder intending to dematerialize its securities needs to open a Demat account with Depository Participant.
• Investor Deface and surrenders his Physical Securities and in turn gets Electronic Shares in his Demat Account

Benefit of Dematerialization:

• Elimination of risk of duplication, theft, fraud and loss with respect to physical share certificates.
• Exemption from payment of stamp duty on transfer.
• Ease in transfer and pledge of securities.

Applicability:

Every unlisted public company with effect from 02nd October 2018 shall-

• Issue its securities only in dematerialized form; and
• Ensure dematerialization of all its existing securities

Except:
This rule shall not apply to an unlisted public company which is:

• A Nidhi;
• A Government company or
• A wholly owned subsidiary of public Company

Quick Bite:
Whether provision of Demat of securities applicable on Deemed Public Company also?

Major Impact on Company:

After 02.10.2018, Unlisted Public Company has to ensure that entire holding of securities of its Promoters, Directors, Key Managerial personnel is in dematerialized Form, otherwise company shall not be able to do followings:

• Issue of securities;
• Buy-back of securities;
• Issue of bonus shares; and
• Rights issue

After 02.10.2018, all new issue of securities or transfer of securities shall be only in Dematerialize form.

Impact on Security Holders (Transfer / subscription of Securities):

Rule 3 of the amendment specifies that every holder of Securities

• who intends to transfer securities or
• who intends to subscribe to any securities of an unlisted public company has to make sure that all their existing Securities are held in dematerialized form before such transfer or subscription to the Securities;

Compliance Requirement by Public Company:

After amendment w.e.f. 02nd October, 2018, Public Companies must have to compliance with the following below mentioned compliances:

A. Make timely payment of Fees (admission as well as annual).

B. Maintenance of Security deposit of 2 years’ Fees, as per agreement executed with the followings:

• Depository;
• Registrar to an issue;
• Share Transfer Agent

C. Comply with the regulations, guidelines or circulars, if any issued by the Securities and Exchange Board or Depository from time to time.

Most Important Compliance Requirement:

Every unlisted public company governed by this rule shall submit Form PAS-6 to the Registrar with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 within sixty days from the conclusion of each half year duly certified by a company secretary in practice or chartered accountant in practice.

B. PROVISIONS IN RELATION TO CHARGES
(Creation/ Modification/ Satisfaction)

Creation/ modification of charge are one of crucial activity for Loan from Bank/ financial institutions etc. However, Companies (Amendment) Ordinance, 2018 have changed the period for Creation/ Modification of Charge with tighter time based norms:

Section Involved: Section 77 Duty to Register Charge

i. BEFORE ORDINANCE: As per Section 77 of Companies Act, 2013, Company has to create charge with the Registrar within 30 days of creation of Charge.

Provided that the Registrar may, on an application by the company, allow such registration to be made within a period of Three Hundred Days of such creation on payment of such additional fees as prescribed:

Condonation: Provided further that if registration is not made within a period of three hundred days of such creation, 'the company shall seek extension of time in accordance with section 87'

ii. AFTER AMENDMENT ACT, 2019: As per Section 77 of Companies Act, 2013, Company has to create charge with the Registrar within 30 days of creation of Charge.

Provided that the Registrar may, on an application by the company, allow such registration to be made within a period of Sixty Days of such creation on payment of such additional fees as may be prescribed.

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