The Companies (Amendment) Act, 2019 A perspective

The Companies (Amendment) Act, 2019

A perspective

2Sumit Jaiswal , FCS, ACMA, Company Secretary, Titagarh Industries Limited

The Companies Act, 2013 has been amended varioustimes by way of Notifications/Removal of difficultiesOrders/Circulars/ Amendments, more notable onesbeing the Companies Amendment Act, 2015, theNotification dated 5th June, 2015 providing certainexemptions to private limited companies and theCompanies (Amendment) Act, 2017 which receivedthe assent of the President of India on 3rd January,2018 succeeding various earlier .

The Ministry of Corporate Affairs (MCA) had formed a10 Member expert committee on June 13, 2018,headed by Shri Injeti Srinivas (Secretary, MCA), forreview of the penal provisions in the 2013 Act. Thebasic aim of the Committee was to carry out de-criminalisation of certain offences and suggest ways toreplace it with in-house mechanism, where a penaltycould be levied in instances of default.

BACKGROUND


The Committee gave its report on August 14, 2018 and theGovernment came out with Companies (Amendment)Ordinance, 2018 (“Ordinance 2018”), based on suchrecommendations, which was promulgated by the Presidentof India on 2nd November, 2018. Legally, an Ordinance is alaw that is promulgated by the President of India on therecommendation of the Union Cabinet. It can only be issuedwhen Parliament is not in session. Ordinances enable thegovernment to take immediate legislative action. Ordinancescease to operate if Parliament does not approve of themwithin six weeks of reassembly, or if disapproving resolutionsare passed by both Houses. It is also compulsory for asession of Parliament to be held within six months.

Mr. Arun Jaitley, the then Hon’ble Minister of CorporateAffairs had introduced The Companies (Amendment) Bill,2018 in the Lok Sabha on 30th December 20, 2018 to replacethe Ordinance 2018. The Bill was passed by the Lok Sabha on4th January, 2019 and was scheduled to be listed in thebusiness of the Rajya Sabha on the last day of its wintersession i.e. 9th January, 2019, but could not be deliberatedand passed on the said date.

BACKGROUND


Thereafter, in order to give continued effect to theCompanies (Amendment) Ordinance, 2018, thePresident promulgated the Companies (Amendment)Ordinance, 2019 and the Companies (Amendment)Second Ordinance, 2019 on the 12th day of January,2019 and the 21st day of February, 2019 respectively.

The Ordinance mainly aimed at re-categorisation ofcertain offences to bring them within the purview ofcompoundable procedure through an in-houseadjudication framework, prescribing stiffer penaltiesin case of repeated defaults with a view to uncloggingNCLT so the Tribunal have greater focus on dealingwith the matters under Insolvency & Bankruptcy Code(IBC). The Ordinance would also further assist in theIndian Government's endeavours to promote ease ofdoing business

BACKGROUND


Thereafter, the Union Cabinet approved the proposal tointroduce the Companies (Amendment) Bill, 2019 to replacethe Companies (Amendment) Second Ordinance, 2019 withcertain other amendments which are considered necessaryto ensure more accountability and better enforcement tostrengthen the corporate governance norms and compliancemanagement in corporate sector.

The Companies (Amendment) Bill, 2019 was placed beforethe Lok Sabha on 25th July 2019. While introducing the Bill inthe Lok Sabha, the Hon’ble Finance and Corporate AffairsMinister, Ms. Nirmala Sitharaman said, “the Bill seeks toensure more accountability and better enforcement tostrengthen the corporate governance norms and compliancemanagement in corporate sector as enshrined in theCompanies Act, 2013”. The Bill was passed in the Lok Sabhaon the 26th of July 2019, and thereafter in the Rajya Sabha on30th July 2019. It received the assent of the President of Indiaon the 31st July, 2019 and was notified in the Official Gazetteon the same date i.e. 31st July, 2019. With this, it has nowbecome the Companies (Amendment) Act, 2019.

BACKGROUND


As mentioned in the Companies (Amendment) Act,2019, the provisions of this Act, except sections 6, 7and 8, clauses (i), (iii) and clause (iv) of section 14,sections 20 and 21, section 31, sections 33, 34 and 35,sections 37 and 38 shall be deemed to have come intoforce on the 2nd day of November, 2018.

The provisions of sections 6, 7 and 8, clauses (i), (iii)and clause (iv) of section 14, sections 20 and 21,section 31, sections 33, 34 and 35, sections 37 and 38shall come into force on such date as the CentralGovernment may, by notification in the OfficialGazette, appoint and different dates may beappointed for these provisions and any reference inany such provision to the commencement of this Actshall be construed as a reference to the coming intoforce of that provision.

EFFECTIVE DATE


Amendments introduced by the Companies (Amendment) Act, 2019:

For the purpose of convenience, the amendments havebeen divided into two parts here, the first part includes theamendments which were included in the erstwhileOrdinance and the second part includes the newly insertedamendments.


Amendments introduced by the Companies (Amendment) Act, 2019:

Part B

The Newly Inserted Amendments

Part A

Amendments Which Where Included In The Erstwhile Ordinance

These are classified under the following broadheadings:

(i) Changes considered to be substantive

(ii) Shifting/ Enhancement of Authority

(iii) Enhancement of Penal Provision

(iv) The word ‘penalty’ used instead of ‘fine’ /Imprisonment removed

BROAD HEADINGS OF DISCUSSION


Part A - CHANGES CONSIDERED TO BE SUBSTANTIVE(Effective from: 2nd November, 2018)

Section of the Companies

Act, 2013 amended by

the Ordinance

Gist of the amendment by The

Companies (Amendment) Ordinance

Remarks

Insertion of new Section 10A:

Commencement of business,

etc.

New Section 10A has been inserted:

Companies having a share capital, which

are incorporated after Ordinance comes

into force, shall not commence business

or exercise borrowing powers unless a

declaration is filed by a Director with the

RoC within 180 days of incorporation that

every subscriber has paid the value of the

shares and its registered office has been

verified in e-Form INC-22 (the

Declaration). Any failure in filing the

Declaration would be one of the grounds

to strike off the name of the company by

Registrar.

(i) This is re-introduction

of erstwhile section 11 of

the 2013 Act omitted

under the Companies

(Amendment) Act, 2015.

(ii)Default in compliance

with section 10A shall

lead to penalty of Rs.

50,000 on the Company

and Rs. 1000 for each

day, upto a maximum of

Rs. 1 lakh, for every

officer in default




Act, 2013 amended by the

Ordinance


Companies (Amendment)

Ordinance

Remarks

Section 12:

Registered Office of

Company

Introduction of a new sub-section (9)

after Section 12(8):

If the Registrar has reasonable cause

to believe that the company is not

carrying on any business or

operations, he may physically verify

the registered office of the company

and if any default is found in

complying with the requirement of

maintenance of registered office, he

may initiate action to remove the

company’s name from the register of

companies

In case any default is found

upon Physical verification of

the registered office, the RoC

may strike-off the name of the

Company from the register of

companies. This appears to be

one of the steps to check

proliferation of shell companies





Ordinance



Ordinance

Remarks

Section 77(1):

Duty to register charges,

etc.

The charges created before

commencement of Ordinance

have to be registered with RoC

within 300 days of such creation.

The charges created on or after

commencement of Ordinance

have to be registered within 60

days of such creation.

The Ordinance reduces the

maximum time period of

reporting for registration

and modification of charge

with the RoC from existing

300 days to 60 days from

date of creation/

modification. It is a

welcome step and would

ensure updated records of

secured borrowings to be

available in public domain.





Ordinance



Ordinance

Remarks

Section 86:

Punishment for

Contravention

Insertion of a sub-section:

If any person willfully furnishes

any false or incorrect

information or knowingly

suppresses any material

information w.r.t. registration

of charges u/s 77, shall be

liable to fraud and attract

action u/s 447

The contravention shall

invite action u/s 447 i.e.

punishment for fraud.

Should work as a

deterrent to suppression

of correct information

regarding secured

borrowings.



Section of the Companies Act,

2013 amended by the

Ordinance

Gist of the amendment by The Companies

(Amendment) Ordinance

Remarks

Substitution of new Section for

Section 87:

Rectification by Central

Government in Register of

Charges

The existing Section 87 has been substituted

to provide:

The Central Government on being satisfied

that-

(a) Omission in giving intimation to the ROC

regarding satisfaction of charge within the

prescribed time; or

(b) Omission or misstatement of particulars

w.r.t. any such charge or modification of

charge or w.r.t any memorandum of

satisfaction or other entry made u/s 82 or

83,

was accidental or inadvertently made, it may

on an application made, direct for extending

the time for intimating about the satisfaction

of charge and rectification of the

misstatement or omission made.

The following

contained in the 2013

Act has been removed:

“…on any other

grounds, it is just and

equitable to grant

relief”. Thus

discretionary power

which could be used

arbitrarily, has been

eliminated.





Ordinance



Remarks

Section 164(1):

Disqualifications for

Appointment of Director

An additional disqualification for

appointment of Director has been added,

viz. non-compliance of provisions of

Section 165(1) [maximum number of

directorships, i.e. not more than 20

companies at the same time, out of which

number of public companies should not

exceed 10].

Accepting directorships

beyond specified limits would

be a ground for

disqualification of the

Director. This would help

check the earlier malpractice

of dubious directors in

multiple shell companies.

Section 248(1):

Power of the Registrar to

remove the name of the

company

Two new clauses for removal of name of

the Company have been introduced:

i) if the subscribers of MoA of the Company

have not paid the subscription amount and

have not furnished a declaration in this

regard within 180 days;

ii) if the Company is found not having any

registered office after physical verification

of registered office.

These two non-compliances

shall be additional grounds

for removal of the name of

the Company by the

Registrar. Please see the

comments on Sections 10A

and 12 above.


Part A -SHIFTING/ ENHANCEMENT OF AUTHORITY(Effective from: 2nd November, 2018)



Ordinance



Remarks

Section 2(41):

Financial Year

The authority to approve application

for change of financial year has been

shifted from “Tribunal” to “Central

Government”.

Any application pending before the

Tribunal as on date of commencement

of Ordinance shall be disposed of by

the Tribunal as per the provisions

applicable before such commencement.

Power of Tribunal has been

transferred from Tribunal

to Central Government with

a view to enable Tribunal

to give greater focus on

other important matters viz.

insolvency petitions and

mergers/demergers etc.

Pursuant to Section 458,

the Central Government

may delegate the power to

any authority or officer.



Section of the

Companies Act, 2013

amended by the

Ordinance



Remarks

Section 14(1):

Alteration of Articles

The authority to approve application

for conversion of a public company

into private company has been shifted

from “Tribunal” to “Central

Government”.

Any application pending before the

Tribunal as on date of commencement

of Ordinance shall be disposed of by

the Tribunal as per the provisions

applicable before such

commencement.

Please see the comment

on Section 2(41) above.



Section of the

Companies Act, 2013

amended by the

Ordinance



Remarks

Section 441:

Compounding of certain

offences

Power of Regional Director to compoundoffence punishable increased upto Rs.25,00,000/-Pre-Ordinance 2019, where the maximumamount of fine for any offence did notexceed Rs. 5 lakh, such offence wascompounded by the Regional Director orany officer authorised by the CentralGovernment.

With the Ordinance the maximum amount

of fine for an offence not exceeding Rs. 25

lakh shall be compounded by the Regional

Director or any officer authorised by the

Central Government.

Pecuniary jurisdiction of

Regional Director to

compound offence has been

enhanced. Further

clarification is made that

offences which are

punishable with

imprisonment only or with

imprisonment and also with

fine shall not be

compoundable. This is

another step to increase the

strictness through provisions

of law and reduce the load on

the Tribunal.



Section of the

Companies Act, 2013

amended by the

Ordinance



Remarks

Section 454:

Adjudication of

penalties

Adjudicating officer can nowimpose penalty on company,officer in default, or any otherperson. The adjudicating officershall also give the direction ofmaking good of the default at thetime of levying penalty.Default would occur when thecompany or the officer in defaultwould fail to comply with theorder of the adjudicating officer orRD as the case may be.

The erstwhile

provisions only

provided for officer in

default. The

introduction of the

word ‘any other person’

shall widen the power

of the adjudicating

officer.


Part A -ENHANCEMENT OF PENAL PROVISION

(Effective from: 2nd November, 2018)



Ordinance



Ordinance

Remarks

Section 90:Register of significantbeneficial owners in acompany

Existing sub-section (9)substituted to provide that anaggrieved party may make anapplication to the Tribunal within1 year from date of such order. Incase no application is madewithin this time, then such sharesshall be transferred to IEPF.Amended Sub-section (10)provides that a person failing inmaking declaration shall beimprisoned for 1 year along withthe fine applicable and may evenbe levied fine and imprisonmentboth.

Considering theimportance of thedisclosures under section90, the punishment forviolation of section 90(1)prescribed under section90(10) is enhanced to theeffect that thecontravention ispunishable with fine orimprisonment or both,instead of beingpunishable with only fine.


Part A -ENHANCEMENT OF PENAL PROVISION(Effective from: 2nd November, 2018)

Section of the Companies Act,

2013 amended by the

Ordinance



Ordinance

Remarks

Section 447:

Punishment for Fraud

Where the fraud involves anamount less than Rs. 10lakh or 1% of the turnoverof the company, whicheveris lower, and does notinvolve public interest, thedefaulter shall bepunishable withimprisonment for a termwhich may extend to 5years, or with maximumfine upto Rs. 50 lakhs orboth.

The maximum fine

under section 447 has

been increased from

Rs. 20 lakhs to Rs. 50

lakhs


Part A -ENHANCEMENT OF PENAL PROVISION(Effective from: 2nd November, 2018)



Ordinance



Ordinance

Remarks

Insertion of a new Section

454A:

Penalty for repeated

default

A new section has been inserted toprovide where a penalty in relationto a default has been imposed on aperson under the provisions of the2013 Act, and the person commitsthe same default within a period ofthree years from the date of orderimposing such penalty, passed bythe adjudicating officer or RD as thecase may be, it or he shall be liablefor every second and subsequentdefault for an amount equal totwice the amount provided for suchdefault under the relevant provisionof the 2013 Act.

For repeated default

within 3 years double

penalty shall be imposed


Part A - THE WORD ‘PENALTY’ USED INSTEAD OF ‘FINE’ / IMPRISONMENT REMOVED(Effective from: 2nd November, 2018)



Ordinance



Ordinance

Remarks

Section 53(3):

Prohibition of issue of

shares at a discount

The company and every officer-

in-default shall be liable to a

penalty equivalent to the

amount raised through issue of

shares at discount or Rs. 5 lakhs,

whichever is less, and shall also

be liable to refund the amount

with interest at the rate of 12%

p.a. from the date of issue of

shares to the persons to whom

such shares have been issued

The Ordinance

provides for penalty

instead of earlier

provision for default

being punishable with

fine or imprisonment

or both.



Section of the

Companies Act,

2013 amended by

the Ordinance



Remarks

Section 64(2):

Notice to be given to

Registrar for

alteration of share

capital

For default in filing of e-Form SH-7 with the

RoC, the company and every officer-in-default

shall be liable to a penalty of Rs. 1000 for each

day during which such default continues or Rs.

5 lakh whichever is less.

The 2013 Act

provided for “fine”.

The Ordinance uses

the term “penalty”.

Section 92(5):

Annual Return

The existing sub-section (5) has been

substituted to provide the following penal

provisions for failure in filing annual return-

Company and ever officer-in-default- Rs.

50,000 and in case of continuing default,

further penalty of Rs. 100 for each day, subject

to maximum of Rs. 5 lakh.

Imprisonment has

been removed.



Section of the

Companies Act, 2013

amended by the

Ordinance



Ordinance

Remarks

Section 102(5):

Statement to be Annexed

to Notice

The existing sub-section (5) has been

substituted to provide the following

penal provisions-

Every promoter, director, manager, KMP

in default being liable to a penalty - Rs.

50,000 or 5 times the amount of benefit

accruing to promoter, director, manager,

KMP or his relatives, whichever is higher.

In place of “fine” the word “penalty

has been used in Amendment

Ordnance

Section 105(3):

Proxies

Default in providing a declaration

regarding appointment of proxy in a

notice calling for general meeting shall

be liable to a penalty of Rs. 5000.

In place of “fine” the word “penalty

has been used in Amendment

Ordinance.





Ordinance



Ordinance

Remarks

Section 117(2):

Resolutions and

Agreements to be Filed

The Ordinance 2019 introduced

a penalty of Rs. 500 per day in

case of continuing failure of

non-filing of resolutions or

agreements as specified under

Section 117(3) in addition to

penalty of Rs. 1 lakh to Rs. 5

lakh against company and Rs.

50,000 against every officer-in-

default including liquidator of

the company

The 2013 Act provided for“fine”. The Ordinance uses theterm “penalty”.For continuing default, afurther penalty of Rs.500 perday has been added.





Ordinance



Ordinance

Remarks

Section 121(3):

Report on Annual

General Meeting

Failure to file the report shall

attract a penalty of-

Company- Rs. 1 lakh and in

case of continuing default,

Rs. 500 for each day upto

maximum Rs. 5 lakh.

Officer-in-default- Rs. 25,000

and in case of continuing

default, a further penalty of

Rs. 500 each day upto

maximum Rs. 1 lakh.

In place of “fine” the word“penalty has been used inthe Ordinance. Forcontinuing default, a furtherpenalty of Rs. 500 per dayhas been added.



Section of the

Companies Act, 2013

amended by the

Ordinance



Remarks

Section 137(3):

Copy of financial

statement to be filed

with Registrar

Non-compliance with sub-section (1) or (2) of

Section 137 shall result in:

(i) the company being liable to a penalty of Rs. 1000

for each day upto maximum of Rs. 10 lakh; and

(ii) the managing director and the Chief Financial

Officer of the company, if any, and, in the absence

of the managing director and the Chief Financial

Officer, any other director who is charged by the

board of directors with the responsibility of

complying with the provisions of Section 137, and,

in the absence of any such director, all the directors

of the company, being liable to a penalty of Rs. 1

lakh and in case of continuing default, a further

penalty of Rs. 100 each day upto maximum Rs. 5

lakh.

In place of “fine” the word“penalty has been used in theOrdinance for non-compliance by the company.In place of being punishablewith fine or imprisonment orwith both, the word “penaltyhas been used in theOrdinance for non-compliance by the concernedofficers.



Section of the

Companies Act, 2013

amended by the

Ordinance



Remarks

Section 140(3):

Removal, resignation of

auditor and giving of

special notice

If an auditor fails to file e-Form ADT-3 within

30 days of his resignation he shall be liable for

a penalty of Rs. 50,000 or his/her

remuneration whichever is lower, with an

everyday penalty of Rs. 5000 if the failure

continues.

In place of “fine” theword “penalty has beenused in the Ordinance.For continuing default,a further penalty of Rs.500 per day has beenadded.

Section 157(2):

Company to inform

Director Identification

Number to Registrar

Failure/Delay by company in informing DIN of

director shall attract a penalty of-

Company- Rs. 25,000 and in case of continuing

default, Rs. 100 for each day upto maximum

Rs. 1 lakh.

Officer-in-default- Rs. 25,000 and in case of

continuing default, a further penalty of Rs. 100

each day upto maximum Rs. 1 lakh.

In place of “fine” u/s157 for not furnishingDIN to the Registrar, theword “penalty has beenused in the Ordinance.If the default continues,a further penalty of Rs.100 shall be levied perday.



Section of the

Companies Act, 2013

amended by the

Ordinance



Remarks

Substitution of new

Section for Section 159:

Penalty for default of

certain provisions

Non-compliance with Section 152

(Appointment of directors), Section 155

(Prohibition to obtain more than one

Director Identification Number) and Section

156 (Director to intimate Director

Identification Number) shall result in any

individual or director of a company in default

being liable to a penalty of Rs. 50,000 and in

case of continuing default, Rs. 500 per day.

In place of beingpunishable with fine orimprisonment, theword “penalty hasbeen used in theOrdinance 2019.If the default continuesa further penalty of Rs.500 shall be levied perday.

Section 165(6):

Number of

Directorships

If a person accepts directorships beyond

specified limits in contravention of sub-

section (1) of Section 165, he shall be liable

to a penalty of Rs. 5000 for each day of

contravention.

In place of “fine” the

word “penalty has

been used in the

Ordinance.





Ordinance



Remarks

Section 191(5):

Payment to Director for

Loss of Office, etc., in

connection with transfer

of undertaking, property

or shares

Non-compliance with Section 191 shall

result in the director of the company

being liable to a penalty of Rs. 1 lakh.


word “penalty has

been used in the

Ordinance.

Section 197(15):

Overall maximum

managerial remuneration

and managerial

remuneration in case of

absence or inadequacy of

profits

Non-compliance with Section 197 shall

result in any person in default being

liable to a penalty of Rs. 1 lakh and in

case of company, Rs. 5 lakh.


word “penalty has

been used in the

Ordinance.





Ordinance



Remarks

203(5):

Appointment of Key

Managerial Personnel

Non-compliance with Section 203

(Appointment of KMPs in certain class of

companies) shall attract a penalty of-

Company- Rs. 5 lakh and in case of

Officer-in-default- Rs. 50,000, and in case

of continuing default, a further penalty of

Rs. 1000 each day upto maximum Rs. 5

lakh.


word “penalty has

been used in the

Ordinance.

Section 238:

Registration of offer of

schemes involving transfer

of shares

The fine provided under this section for

the director for non-compliance with

clause (c) of sub-section (1) of Section

238 has been substituted with a penalty

of Rs. 1 lakh


word “penalty” has

been used in the

Ordinance.





Ordinance



Remarks

Section 446B:

Application of fines

The penal provisions for any default inthe annual return of a OPC or smallcompany shall be liable to a penaltywhich shall not be more than one half ofthe penalty specified in provisions ofSection 92(5), section 117(2) or section137(3)

The penal provision for

any default in the

annual return of an

OPC or small company

has been modified

from fine to penalty.

The re-categorisation of the consequences of certain offences from ‘fine’ to ‘penalty’ isexplained as follows: fine requires prosecution which is adjudicated by a Court of competentjurisdiction whereas penalty is a departmental affair. There is no question of compounding incase of penalty. The Ordinance should facilitate expeditious administration of the processinvolving offences, their consequences and disposal. With the amendments coming into force,Registrar of Companies and Regional Directors can now impose penalties directly after issuinga show cause notice online. Going forward, this will help in speedy disposal of such cases.


Part B -THE NEWLY INSERTED AMENDMENTS

Effective from: They shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for these provisions.



Ordinance



Remarks

Section 26:

Matters to be Stated in

Prospectus

For the word “registration” in sub-

sections (4), (5) and (6), the word

“filing” shall be substituted.

This substitute the requirement of

registration of prospectus with filing of

prospectus with the Registrar.

Accordingly, sub-section (7) has been

omitted

This means that the

event of filing is to be

considered for those

sub-sections rather than

registration.

‘Registration’ denotes

the approval of RoC

w.r.t. the filing.






Ordinance



Remarks

Section 29:Public Offer of Securitiesto be in DematerialisedForm

The word ‘public’ has been omittedfrom section 29(1)(b). Also, aninsertion of section 29(1A) has beendone that states that, “In case of suchclass or classes of unlisted companiesas may be prescribed, the securitiesshall be held or transferred only indematerialised form in the manner laiddown in the Depositories Act, 1996 andthe regulations made thereunder.”

With the omission of the

word “public” the scope of

the section has been

enlarged to include private

companies in its ambit. The

Central Government can

thus prescribe any class of

unlisted companies

including private

companies for issuance,

holding or transferring of

securities in dematerialised

form






Ordinance



Remarks

Section 35:Civil Liability for Mis-statements in Prospectus

In section 35(2)(c) the person shall not beheld liable if he proves that “as regardsevery misleading statement purported to bemade by an expert or contained in whatpurports to be a copy of or an extract from areport or valuation of an expert, it was acorrect and fair representation of thestatement, or a correct copy of, or a correctand fair extract from, the report orvaluation; and he had reasonable ground tobelieve and did up to the time of the issue ofthe prospectus believe, that the personmaking the statement was competent tomake it and that the said person had giventhe consent required by sub-section (5) ofsection 26 to the issue of the prospectus andhad not withdrawn that consent beforefiling of a copy of the prospectus with the

The reference of‘Registration ofProspectus with theRegistrar’ is replaced by‘Filing of copy ofProspectus with theRegistrar’.






Ordinance



Remarks

Section 90:Register of significantbeneficial owners in acompany

• New sub-section 4A inserted to provideevery company shall take necessarysteps to identify an individual who is aSBO. Failure to take necessary steps hasbeen made punishable.

• Sub-section (9) has been substituted asfollows: If no person files an applicationbefore NCLT for lifting of the restrictionson the exercise of rights attached to theshares within a period of one year, suchshares shall be transferred to IEPFwithout any restrictions (w.e.f.02/11/2018)

• A new sub-section (9A) has beeninserted to provide the power to theCentral Government to make rules forthe purposes of this section.

The reference of‘Registration ofProspectus with theRegistrar’ is replaced by‘Filing of copy ofProspectus with theRegistrar’.






Ordinance



Remarks

Section 135:Corporate SocialResponsibility

• Sub-section (5) is amended to provide thatin case of a company which has notcompleted the period of three financialyears since its incorporation, the CSRapplicability limits shall be checked duringsuch immediately preceding financial years.

• Sub-sections (6), (7) and (8) have beeninserted to provide:

i. In case the unspent amount does notrelate to any ongoing project, unspentamounts to be transferred to a Fundspecified under Schedule VII within aperiod of six months of the expiry of thefinancial year.

ii. In case the unspent amount relates to anyongoing project subject to fulfilling ofprescribed conditions, unspent amountsto be transferred by the company within aperiod of thirty days from the end of the

The companies will have to

transfer the unspent CSR

funds to an escrow account

at the end of the financial

year. The firms which

haven’t made any

expenditure towards CSR in

a given year will have to

transfer the amount to the

newly set up National CSR

Fund. at the end of the

year.






Ordinance



Remarks

Section 135:Corporate SocialResponsibility

(Continued)

iii. Such amount shall be spent by thecompany in pursuance of its obligationtowards the Corporate SocialResponsibility Policy within a period ofthree financial years from the date ofsuch transfer, failing which, the companyshall transfer the same to a Fundspecified in Schedule VII, within a periodof thirty days from the date of completionof the third financial year.

iv. Penal provisions inserted as under:• The company - punishable with fine which

shall not be less than Rs. 50,000 but whichmay extend to Rs. 25 lakh

• Every officer of such company who is indefault - shall be punishable withimprisonment for a term which may extendto 3 years or with fine which shall not beless than Rs. 50,000 but which may extendto Rs. 5 lakh, or with both.

v. MCA empowered to give general orspecial directions to a company or class ofcompanies as it considers necessary to ensurecompliance of provisions of this section.

In gist, the Government

gave its nod to amend a

Corporate Social

Responsibility (CSR)

provision, allowing the

companies to spend CSR

funds over a period of

three years instead of one

year at present.






Ordinance



Remarks

Section 212:Investigation into affairsof company by SeriousFraud InvestigationOfficer.

Amendment in Sub section 8:-

Any officer of SFIO not below the rank of Assistant

Director has a power to arrest under

circumstances as specified under the Act.

Amendment in Sub section 10:-

The person so arrested may be taken to a Special

Court or Judicial Magistrate or Metropolitan

Magistrate within 24 hours of his arrest.

After sub section 14 following sub-section 14A

shall be inserted:-

Where an investigation report submitted by SFIO

states that a fraud has taken place and any

director, KMP or officer has taken undue

advantage or benefit, then the Central

Government may file an application before the

Tribunal with regard to disgorgement and such

director, KMP or officer may be held personally

liable without any limitation of liability

The powers of SFIO have been

enhanced.

If any director, KMP or officer

has taken undue advantage or

benefit in case of fraud, then

he may be held personally

liable without any limitation of

liability






Ordinance



Remarks

Section 241: Application to Tribunalfor relief in cases ofoppression, etc.

The amendments here provides that:

Central Government to prescribe such

company or class of companies in respect of

which, applications under such sub-section,

shall be made before the Principal Bench of

NCLT and shall be dealt with by such Bench.

In certain circumstances, the Central

Government may refer the matter and

request to the Tribunal to inquire into the

case and record a decision about whether the

person is a fit and proper person to hold the

office of director or any other office

connected with the conduct and

management of any company

Now, if in the opinion of the

Central Government there exist

circumstances suggesting that

the business of the Company is

being managed in a manner

which is likely to cause serious

injury or damage to the

business or with an intent to

defraud any person, it may

refer the matter directly to the

Tribunal to inquire into the

case.






Ordinance



Remarks

Section 242 : Powers of Tribunal.

A new sub-section inserted to provide that in

matters under section 241, the Tribunal shall

record its decision stating specifically as to

whether or not the respondent is a fit and proper

person to hold the office of director or any other

office connected with the conduct and

management of any company

Specific recording in this regard

by the Tribunal is required.






Ordinance



Remarks

Section 243 :Consequence oftermination ormodification of certainagreements.

Newly inserted sub-sections (1A) and (1B)provides that:• The person who is not a fit and proper personpursuant to section 242 shall not hold the office ofa director or any other office connected with theconduct and management of the affairs of anycompany for a period of five years from the dateof the decision of the Tribunal.• Central Government may, with the leave of theTribunal, permit such person to hold any suchoffice before the expiry of the said period of fiveyears.• The person so removed from the office of adirector or any other office connected with theconduct and management of the affairs of thecompany shall not be entitled to, or be paid, anycompensation for the loss or termination of office.

The government will now beable to remove and ban chiefexecutive and directors of acompany facing fraud fromholding a key managerialposition in any company for aperiod of five years.






Ordinance



Remarks

Section 272 :Petition for winding up.

In section 272(3), the reference to clause (e) is

omitted: Registrar may present a petition of

winding up on the ground that it is just and

equitable to do so under Clause (e) of Section

271.

The amendments enables the

Registrar to present a petition

for winding up under section

271 with only the exception of

situation where if the company

has, by special resolution,

resolved that the company be

wound up by the Tribunal the

Registrar may not present such

petition.






Ordinance



Remarks

Section 398 :Provisions relating tofiling of applications,documents, inspection,etc., in electronic form.

The word ‘prospectus’ in clause (f) of sub-section (1) of section 398 has been omittedas prospectus is not required to beregistered by the Registrar

Consequent to theamendment of filingprospectus u/s 26 of theAct, the provisions withregards to registration ofprospectus is deleted.

Some other recent amendments in Companies Act


Key Highlights: MCA has amended the Companies (Appointment andQualification of Directors) Third Amendment Rules, 2019whereby: e-Form DIR-3 KYC is to be filed by an individual who holdsDIN and is filing his KYC details for the first time or by the DINholder who has already filed his KYC once in e- Form DIR-3 KYCbut wants to update his details. Web service DIR-3-KYC-WEB is to be used by the DIN holderwho has submitted DIR-3 KYC e- Form in the previous financialyear and no update is required in his details.

Fees – E - Form DIR-3 KYC / Web Service DIR-3 KYC WEBhas to be filed till September 30 of every financial year, forthe immediate previous financial year without any fees. Incase of delayed filing a sum of RS. 5000/- shall be charged.

FILING OF FORM DIR - 3 KYC (Notification dated: 25.07.2019)


RELAXATION OF ADDITIONAL FEES AND EXTENSION OF LASTDATE OF FILING OF FORM BEN-2 UNDER THE COMPANIESACT, 2013 (Circular dated: 29.07.2019)

The date of filing of Form BEN-2 has been extended upto30.09.2019 without payment of additional fee by MCA videcircular dated 29.07.2019

EXTENSION OF LAST DATE OF FILING FORM BEN-2


Charges created or modified on or after 02.11.2018

The following additional fees or advalorem fees, as the casemay be, shall be payable up to 31st July, 2019, by allcompanies:-

NEW FEES STRUCTURE FOR CREATION / MODIFICATION OF CHARGES

Period of delays Fee applicable

Up to 30 days 2 times of normal fees

More than 30 days andup to 60 days

4 times of normal fees

More than 60 days andup to 90 days

6 times of normal fees


The fees for filing Form CHG-1 has been revised w.e.f. August 1, 2019. The revised fee structure is as follows:

NEW FEES STRUCTURE FOR CREATION / MODIFICATION OF CHARGES

Small Companiesand OPC

Other than Small Companies and OPC

Within 30 days Normal Fees Normal Fees

Delay upto 30days

3 times normalfees

6 times normalfees

Delay more than30 days and up to90 days

3 times of normalfees plus an advalorem fee of0.025 per cent. ofthe amountsecured by thecharge, subject tothe maximum ofrupees one lakh.

6 times of normalfees, plus an advalorem fee of0.05 per cent. ofthe amountsecured by thecharge, subject tothe maximum ofrupees five lakhs.

Sumit JaiswalFCS, ACMACompany SecretaryTitagarh Industries LimitedA Titagarh Group Company756 Anandapur, E.M. Bypass, Kolkata - 700107Email: [email protected]: 9830106929

Let’s Take It Forward….

THANK YOU..

The views expressed herein aresolely the views of the Authorand are not connected in any waywith the views of the Company/orthe Group where the Author isemployed.

mailto:[email protected]

Date post:	28-Feb-2022
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The Companies (Amendment) Act, 2019 A perspective

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