The Companies (Amendment) Ordinance, 2019 was passed by the Rajya Sabha on the 30th day of July, 2019 and received the Assent of President on 31st July 2019. Earlier the Amendment Bill, 2019 was passed by Lok Sabha on the 27th day of July, 2019. The Ordinance promulgated is based on the recommendations made by the Committee appointed by the Government to review offences under the Act.
The twin objectives of the Ordinance are the promotion of Ease of Doing Business along with better corporate compliance. The key aim of the amendments are as follows.
|Analysis of The Companies (Amendment) Ordinance, 2019 dated 12TH January 2019.|
|SR.NO.||SECTION||PRACTICAL EFFECT OF THE AMENDMENT|
|The power to approve the application made by that company or body corporate or associate company for considering any period as its financial year, whether or not that period is a year; has been shifted to Central Government from National Central Law Tribunal.
Further, all the applications pending before the Tribunal as on the date of commencement of the Companies (Amendment) Ordinance, 2018, shall be disposed of by the Tribunal.
Commencement of Business
Provisions of the “Commencement of Business” are brought back by the Companies (Amendment) Ordinance 2018. Previously it was under section 11 of Companies Act 2013 which was omitted via Notification Number S.O. 1440(E) dated 26th May 2015.
A Company incorporated after the commencement of the Companies (Amendment) Ordinance 2018 and having a share capital shall not commence any business or exercise any borrowing powers unless :-
(a) declaration is filed by the Director within a 180 days of the date of incorporation with the ROC, that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him.
(b) the company has filed with the Registrar a verification of its registered office .
Penalty would be levied for non-compliance of above mentioned clauses.
Registered office of Company
|After sub-section 8, new “sub-section 9” has been inserted.
If the Registrar has reasonable cause to believe that the company is not carrying on any business or operations and during the physical verification of the registered office of the company, the registrar founds that there is no such registered office where the company can receive any notices or acknowledgments then the he (registrar) may initiate action for the removal of the name of the company from the register of companies under Chapter XVIII.
Prohibition on issue of shares at discount
|The Companies (Amendment) Ordinance 2018, has revised the penalty provisions. The penalty has been increased for the default done under this section.|
Notice to be given to Registrar for alteration of share capital.
|Where any company defaults in giving notice to the registrar for alteration of share capital, then the company and every officer will be punishable. Previously the company and who so ever officer was in default, was punishable.|
Duty to register charges
|Limits for registration of charges has been revised.
1) Charge shall be registered with the registrar within 30 days from of its creation.
2) Charges created before Companies (Amendment) Ordinance 2018:
(a) Within 300 days of such creation
(b) if registration not done within 300 days, then within 6 months from the date of commencement of the Companies (Amendment) Ordinance 2018, on payment of such additional fees
3) Charges created after Companies (Amendment) Ordinance 2018:
(a) Within 60 days of such creation
(b) if registration not done within 60 days, then further period of 60 days after of payment of such additional fees.
Investigation of beneficial ownership of shares in certain cases.
|The Companies (Amendment) Ordinance 2018, has levied the time frame within which the person aggrieved by the order of the tribunal may make an application to the tribunal for relaxation or lifting of restrictions, i.e. within period of 1 year from the date of such order.
If no application has been filed within a period of one year from the date of the order, then such shares shall be transferred to IEPF
|8||92, 102, 105, 117, 121, 137, 140, 157, 159, 165, 191, 197, 203, 238, 441, 446B, 447, 454,||Penal provisions for the following points have been rationalised:
– Annual Return
– Statement to be annexed to notice.
– Resolutions and agreements to be filed
– Report on annual general meeting
– Copy of financial statement to be filed with Registrar
– Removal, resignation of auditor and giving of special notice
– Company to inform Director Identification Number to Registrar
– Punishment for contravention
– Number of directorships
– Payment to director for loss of office, etc., in connection with transfer of undertaking, property or shares
– Overall maximum managerial remuneration
– Appointment of key managerial personnel
– Registration of offer of schemes involving transfer of shares
– Compounding of certain offences
– Application of Fines
– Punishment of Fraud
– Adjudication of penalties.
Disqualification for appointment of Directors
|Clause (i) has been inserted.
The effect of new clause inserted: director gets disqualified if he holds directorship above specified limit u/s 165. It will have effect of vacation of office also.
Removal of names of Companies from the Register of Companies
|Company to be struck off if the commencement of Business certificate u/s 10A(1) is not obtained or if Registered office is not found on physical verification by ROC u/s 12(9)|
|ADDITIONAL AMENDMENTS THROUGH COMPANIES (AMENDMENT) BILL, 2019|
Matters to be stated in Prospectus
|The requirement of registration of prospectus with the Registrar of Companies has been done away with. Instead the prospectus would be filed with the Registrar.|
Public offer of securities to be in dematerialised form
|The word “Public” has been omitted from 29(1)(b). The compulsion held the securities in the dematerialised form is not only restricted to the public companies. Government will prescribe the class of companies.|
Civil Liability for Mis-statements in Prospectus
|The Companies need to file the prospectus with the Registrar.|
Register of significant beneficial owners in a company
|The company shall take necessary steps to identify an individual who is a SBO. Failure to take necessary steps has been made punishable.
Constitution of National Financial Reporting Authority
|The NFRA shall perform its functions through such divisions as may be prescribed by government. There shall be an executive body of the National Financial Reporting Authority consisting of the Chairperson and full-time Members of such Authority for efficient discharge of its functions.|
Disclaimer : The views presented are personal and has nothing to do with where I am employed. Views are in general form and not as legal advice.