The Union Minister for Finance and Corporate Affairs on 25th July, 2019 introduced the Companies (Amendment) Bill, 2019 in Lok Sabha.
Background and Developments:
|2nd November, 2018||President of India promulgated the Companies (Amendment) Ordinance, 2018|
|4th January, 2019||Companies (Amendment) Bill, 2019 was introduced with an objective to amend the Companies Act, 2013 and to replace the Companies (Amendment) Ordinance, 2018, which was duly passed by the House of People and the same was presented before the Council of States.|
|12th January,2019||In order to give continued effect to the Companies (Amendment) Ordinance, 2018, the President of India promulgated the Companies (Amendment) Ordinance, 2019.|
|21st February, 2019||It was felt necessary by the Government of India to give continued effect to the Companies (Amendment) Ordinance, 2019.
As it was scheduled to expire on 13th March, 2019 and since the Companies (Amendment) Bill, 2019 was still pending then having the parliament was not in session, the President of India considering the prevailing circumstances promulgated Companies (Amendment) Second Ordinance, 2019.
|25th July, 2019||The Companies (Amendment) Bill, 2019 is presented in the Lok Sabha.|
The Bill reiterates the amendments introduced the Ordinance along with some additions to the same. The key highlights of the Bill are given below.
- The applications for change in Financial Year will now be made to the Central Government and not the Tribunal.
- A new provision- Commencement of Business, etc. has been incorporated which requires the company to file with the Registrar that every subscriber to the memorandum has paid the value of the shares as agreed. The declaration must be filed within 180 days of incorporation in prescribed form. Non-filing will attract penalty, Rs. 50000 for a Company and Rs.1000 for Officer in Default for each day up to a maximum limit of Rs.1 lakh and may result in removal of the company name from the Register of Companies. The provision also requires a verification of registered office of such company.
- Registrar may undertake physical verification of the Registered Office of a company on having cause to believe that it is not carrying out its business operations. On finding default, Registrar will proceed with removal of name of the company from Register of Companies.
- Conversion of public company to a private company to take place with the approval of the Central Government. However, applications made before the commencement of this ordinance will be dealt with under the previous provisions.
- Charges created before commencement of Ordinance must be registered within 300 days of their creation and in case the charge is not registered within this time, they must be registered within 6 months from the date of commencement of Ordinance on payment of additional fees.
Charges created after commencement of Ordinance must be registered within 60 days of their creation, and in case the charge is not registered within this time, the Registrar may on application, allow the registration of the charge within a period of further 60 days on payment of ad valorem fees.
- Furnishing of false or incorrect information or knowingly suppressing any material information with respect to registration of charges will attract penalty for fraud under the Act.
- Failure of declaration by beneficial owner will now attract additional penalty of 1 year imprisonment.
- In case of failure to file annual return Company and officer-in-default will be liable to a penalty of Rs.50000 and in case of continuing default, further penalty of Rs.100 for each day up to maximum Rs.5 lakhs will be imposed. No imprisonment will be imposed in such cases.
- Penalty for failure to file resolution, failure to file report on AGM, contravention of maximum number of directorships, issuing of shares at discount, default in filing of notice with regard to alteration of share capital have been revised and fines for several other contraventions have been replaced with penalty, making them civil offences.
- In case of contravention of the maximum number of limits for directorship as prescribed i.e. 20 for private companies and 10 for public companies, the same will be the ground for disqualification of Director.
- Earlier Independent Directors were not entitled to stock options and could receive sitting fees, reimbursement of expenses for participation in Board and profit related commission. Now this has been omitted.
- For failure to comply with the provisions of Overall Maximum Managerial Remuneration and Managerial Remuneration in Case of Absence or Inadequacy of Profits, fine for individual is fixed at 1 lakh and for company at 5 lakhs.
- Two new grounds for removal of name of company from register of company have been added-
- If the subscribers of Memorandum of Association of the Company have not paid the subscription amount and have not furnished a declaration in this regard within 180 days
- If the Company is revealed to not having any registered office after physical verification of registered office.
- In cases of fraud, where the fraud involves an amount less than Rs.10 lakh or 1% of the turnover of the company and does not involve public interest the defaulter will now be punishable with imprisonment for a term which may extend to 5 years. The maximum fine in this regard has be increased from Rs. 20 lakhs to Rs. 50 lakhs.
- Offences which are punishable with imprisonment only or with imprisonment and fine will not be compoundable.
- For repeated default within 3 years, under the Companies Act, 2013, double penalty will be imposed upon such defaulter.
- The pecuniary jurisdiction of Regional Director has been widened by enhancing the limit up to Rs.25 lakhs as against earlier limit of Rs.5 lakhs.
- Securities shall be held or transferred only in dematerialized form in the manner laid down in the Depositories Act, 1996 and the regulations made thereunder.
- In case of any violation of prohibitions imposed for issuing shares at discount hefty penalty will be imposed on such companies and every officer who is in default, they shall be liable to a penalty which may extend to an amount equal to the amount raised through the issue of shares at a discount or five lakh rupees, whichever is less, and the company shall also be liable to refund all monies received with interest at the rate of twelve per cent. per annum from the date of issue of such shares to the persons to whom such shares have been issued.
- Companies mandated to provide Corporate Social Responsibility (CSR), if are unable to spend full funds kept for CSR activities, in that case, such companies need to specify the reasons for the same in its annual report. In cases of unspent CSR funds, the said unutilized or unspent funds to be transferred to any one of the funds mentioned under Schedule VII [specifying activities which may be included by companies in their CSR Policies Activities (eg. PM Relief Fund)] within six months of the financial year.
- In cases of CSR funds being committed to any ongoing projects and such funds are not being fully exhausted then such unutilized funds are to be transferred to and unspent CSR account within 30 days of the end of the financial year and shall ensure to spend the same within three years thereon. For any funds which remains unutilized even after three years then the said fund to be transferred to any one of the funds mentioned under Schedule VII. Any violation of such stipulation shall attract fine between Rs 50,000 and Rs 25,00,000 and every defaulting officer may be punished with imprisonment of up to three years or fine between Rs 50,000 and Rs 25,00,000, or both.
Source: Lok Sabha