The Companies Amendment Bill, 2019

moderator
By moderator August 13, 2019 13:00

The Companies Amendment Bill, 2019 was passed by the parliament in August 2019. It amends the Companies Act, 2013.

The Companies Amendment Bill has taken into consideration the amendments that were originally notified in the

Companies Amendment Ordinance, 2018 & 2019 which were promulgated by the President and then retained in effect through the Companies Amendment Ordinance Act, 2019.

Key changes that the Companies Amendment Bill has brought about are as follows:

  • Doing away with the prerequisite of registering the prospectus with the registrar (in case of a public offer) to only a filing requirement.
  • Extending the possibility of mandating dematerialisation of securities even to private limited companies by providing requisite powers to the Central Government.
  • Specific responsibility cast on companies to identify significant beneficial owners (SBO).
  • Stricter enforcement of compliance with corporate social responsibility (CSR) provisions and introduction of the penal clause.

The key amendments other than those that were bought in through the ordinance are analysed below.

  • Issuance of dematerialised shares: Under the Act, certain classes of public companies are required to issue shares in dematerialised form only.
    • The Bill states this may be prescribed for other classes of unlisted companies as well.
  • Re-categorisation of certain Offences: The 2013 Act contains 81 compoundable offences punishable with fine or fine or imprisonment, or both. These offences are heard by courts.
    • The Bill re-categorizes 16 of these offences as civil defaults, where adjudicating officers (appointed by the central government) may now levy penalties instead.
  • Corporate Social Responsibility (CSR): Under the Act, if companies which have to provide for CSR, do not fully spend the funds, they must disclose the reasons for non-spending in their annual report.
    • Under the Bill, any unspent annual CSR funds must be transferred to one of the funds under Schedule 7 of the Act (e.g., PM Relief Fund) within six months of the financial year.
    • However, if the CSR funds are committed to certain ongoing projects, then the unspent funds will have to be transferred to an Unspent CSR Account within 30 days of the end of the financial year and spent within three years.
    • Any funds remaining unspent after three years will have to be transferred to one of the funds under Schedule 7 of the Act.
  • Registration of charges: The Act requires companies to register charges (e.g., mortgages) on their property within 30 days of the creation of charge, extendable up to 300 days with the permission of the RoC.
    • The Bill changes the deadline to 60 days (extendable by 60 days).
  • Change in approving authority: Under the Act, change in the period of the financial year for a company associated with a foreign company has to be approved by the National Company Law Tribunal.
    • Under the Bill, these powers have been transferred to the central government.
  • Compounding: Under the Act, a regional director can compound (settle) offences with a penalty of up to five lakh rupees.  The Bill increases this ceiling to Rs 25 lakh.
  • Bar on holding office: Under the Act, the central government or certain shareholders can apply to the NCLT for relief against mismanagement of the affairs of the company.
    • The Bill states that in such a complaint, the government may also make a case against an officer of the company on the ground that he is not fit to hold office in the company, for reasons such as fraud or negligence.
  • Beneficial ownership: If a person holds the beneficial interest of at least 25% shares in a company or exercises significant influence or control over the company, he is required to make a declaration of his interest.
    • The Bill requires every company to take steps to identify an individual who is a significant beneficial owner and require their compliance under the Act.

The Bill proposes to add a proviso to Section 2 to permit companies which are subsidiaries or associates of foreign companies which follow a different financial year for accounting outside India to follow any period as its financial year

Benefits

  • Companies not spending the mandatory 2 per cent profit on Corporate Social Responsibility (CSR) activities for a total period of four years will be required to deposit the amount in a special account.
  • The Companies Amendment Bill is aimed at improving ease of doing business and also reducing the compliance burden on the companies, especially the smaller ones.
  • Four lakh companies have been identified and de-registered –  non-maintenance of registered office, a ground for de-registration of companies.
  • The act empowers the Registrar of Companies (ROC) to initiate action for removal of the name of the company from the Register of companies if it is not carrying on any business or operation in accord with the company law.
  • It will ensure more accountability and better enforcement to strengthen corporate governance norms and compliance management in the corporate sector.

Also read: Rajya Sabha passes POCSO amendment bill

Right To Information (Amendment) Bill, 2019

Source

moderator
By moderator August 13, 2019 13:00