Analysis of Companies (Amendment) Ordinance, 2018

Rameshwar 07 Nov 2018 7,074 Views 0 comment Print Company Law | Articles

Companies (Amendment) Ordinance, 2018 has brought in major changes in the many of the provisions of the Companies Act, 2013. In this article, author discusses major amendments by Companies (Amendment) Ordinance, 2018 mentioning Corresponding section of the Companies Act, 2013

Section – Companies (Amendment) Ordinance, 2018	Corresponding section of Companies Act, 2013	Amendments
Declogging the NCLT
Section 2	Section 2(41)- Definition of ‘Financial year’	The power to dispose the application for change of financial year and pass suitable orders thereon has been vested with the Central Government, which may delegate the same to any other authority; Earlier the said power was with NCLT Further, any application pending before NCLT as on the date of commencement of the Companies (Amendment) Ordinance, 2018, shall be disposed of by NCLT in accordance with the provisions applicable to it before such commencement.
Section 5	Section 14- Alteration of articles	The power to approve the conversion of public company into a private company has been vested with the Central Government, which may delegate the same to any other authority; Earlier the said power was with NCLT Further, any application pending before NCLT as on the date of commencement of the Companies (Amendment) Ordinance, 2018, shall be disposed of by NCLT in accordance with the provisions applicable to it before such commencement.
Section 28	Section 441- Compounding of certain offences	The pecuniary jurisdiction of RD (Regional Director) for compounding of offences has been enhanced to Rs 25 lakhs from Rs 5 lakhs, which will reduce the number of compounding applications filed with NCLT; Section 441(6)(a), which requires the permission of the Special Court for compounding of offences, has been omitted. RD and NCLT, as the case may be, can compound offence which is punishable with imprisonment or fine or both, or with fine or imprisonment.
Related to Corporate Compliance
Section 3	Section 10A- Commencement of business, etc. (new section)	Re-introduction of Commencement of Business: 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. a declaration is filed by a director within a period of 180 days of the date of incorporation of the company, with RoC that every subscriber to MOA has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and b. the company has filed with RoC a verification of its registered office as provided in section 12. Penal Provision: If default is made in complying with the requirements of this section, the company shall be liable to a penalty of Rs 50,000 and every officer who is in default shall be liable to a penalty of Rs 1,000 for each day during such default continues but not exceeding and amount of Rs one lakh; Removal of name of company: Where no declaration has been filed with RoC within 180 days of the date of incorporation of the company and RoC has reasonable cause to believe that the company is not carrying on any business or operations, he may, initiate action for the removal of the name of the company from the register of companies under section 248.
Section 4	Section 12- Registered office of company	RoC may cause a physical verification of the registered office of the company and the RoC has reason to believe that the Company is not carrying into business/ operation after physical verification, he may initiate action to strike off the name of the Company.
Section 8	Section 77- Duty to register charges, etc.	The period of 300 days for creation and modification of charge has been reduced to 60 days, i.e. 30 days of normal filing period and 30 days with additional fees. RoC may, on an application, allow such registration to be made within a further period of 60 days after payment of such advalorem fees as may be prescribed. Note: After 120 days, creation/ modification of charge shall not be registered. Charges created before the commencement of the Ordinance can be registered within 6 months of commencement of the Ordinance.
Section 21	Section 164- Disqualifications for appointment of director	New ground of disqualification has been added: If a person has not complied with the number of directorship u/s 165(1) i.e. maximum number of directorship.
Re-categorising of offences from compoundable offences to an in-house adjudication framework
Section 6	Section 53- Prohibition on issue of shares at discount	Old Penal Provision	New Penal Provision
		Company: Fine: Rs 1 lakh to Rs 5 lakhs; and Officer in default: Imprisonment: Upto 6 months; or Fine: Rs 1 lakh to Rs 5 lakhs; or with both	Company and Officer in default 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 Rs 5 lakhs, whichever is less and the company shall also be liable to refund all monies received with interest @ 12% per annum from the date of issue of such shares to the persons to whom such shares have been issued.
Section 7	Section 64- Notice to be given to Registrar for alteration of share capital	Old Penal Provision	New Penal Provision
		Company and Officer in default: Fine: Upto Rs 1,000 for each day during which such default continues, or Rs 5 lakhs, whichever is less	Company and Officer in default shall be liable to a penalty of Rs 1,000 for each day during which such default continues, or Rs 5 lakhs, whichever is less.
Section 12	Section 92- Annual return	Old Penal Provision	New Penal Provision
		Company: Fine: Rs 50,000 to Rs 5 lakhs; and Officer in default: Imprisonment: Upto 6 months; or Fine: Rs 50,000 to Rs 5 lakhs; or with both	Company and Officer in default shall be liable to a penalty of Rs 50,000 and in case of continuing failure, with further penalty of Rs 100 for each day during such failure continues, subject to a maximum of Rs 5 lakhs.
Section 13	Section 102- Statement to be annexed to notice	Old Penal Provision	New Penal Provision
		Every promoter, director, manager or other KMP who is in default: Fine: Upto Rs 50,000 or five times the amount of benefit accruing to the promoter, director, manager or other KMP or any of his relatives, whichever is more.	Every promoter, director, manager or other KMP who is in default shall be liable to a penalty of Rs 50,000 or five times the amount of benefit accruing to the promoter, director, manager or other KMP or any of his relatives, whichever is higher.
Section 14	Section 105- Proxies	Old Penal Provision	New Penal Provision
		Officer who is in default: Fine: Upto Rs 5,000.	Officer who is in default shall be liable to a penalty of Rs 5,000.
Section 15	Section 117- Resolutions and agreements to be filed	Old Penal Provision	New Penal Provision
		Company: Fine: Rs 1 lakh to Rs 25 lakhs; and Officer in default including liquidator: Fine: Rs 50,000 to Rs 5 lakhs	Company shall be liable to a penalty of Rs 1 lakh and in case of continuing failure, with further penalty of Rs 500 for each day after the first during which such failure continues, subject to a maximum of Rs 25 lakhs; and Officer who is in default including liquidator shall be liable to a penalty of Rs 50,000 and in case of continuing failure, with further penalty of Rs 500 for each day after the first during which such failure continues, subject to a maximum of Rs 5 lakhs.
Section 16	Section 121- Report on annual general meeting	Old Penal Provision	New Penal Provision
		Company: Fine: Rs 1 lakh to Rs 25 lakhs; and Officer in default: Fine: Rs 25,000 to Rs one lakh.	Company shall be liable to a penalty of Rs one lakh and in case of continuing failure, with further penalty of Rs 500 for each day after the first during which such failure continues, subject to a maximum of Rs 5 lakhs; and Officer who is in default shall be liable to a penalty which shall not be less than Rs 25,000 and in case of continuing failure, with further penalty of Rs 500 for each day after the first during which such failure continues, subject to a maximum of Rs one lakh.
Section 17	Section 137- Copy of financial statement to be filed with Registrar	Old Penal Provision	New Penal Provision
		Company: Fine: Rs 1,000 for every day during which the failure continues but which shall not be more than Rs 10 lakhs; and Defaulted MD and CFO or any other director: Imprisonment: Upto 6 months; or Fine: Rs 1 lakh to Rs 5 lakhs; or with both	Company shall be liable to a penalty of Rs 1,000 for every day during which the failure continues but which shall not be more than Rs 10 lakhs; and Defaulted MD and CFO or any other director shall be liable to a penalty of Rs 100 for each day after the first during which such failure continues, subject to a maximum of Rs 5 lakhs
Section 18	Section 140- Removal, resignation of auditor and giving of special notice	Old Penal Provision	New Penal Provision
		Auditor in default: Fine : not less than Rs 50,000 or the remuneration of the auditor, which ever is less but which may extend to Rs 5 lakhs.	Auditor in default shall be liable to a penalty of Rs 50,000 or an amount equal to the remuneration of the auditor, whichever is less, and in case of continuing failure, with further penalty of Rs 500 for each day after the first during which such failure continues, subject to a maximum of Rs 5 lakhs.
Section 19	Section 157- Company to inform Director Identification Number to Registrar	Old Penal Provision	New Penal Provision
		Company: Fine: Rs 25,000 to Rs one lakh; and Officer in default: Fine: Rs 25,000 to Rs one lakh.	Company shall be liable to a penalty of Rs 25,000 and in case of continuing failure, with further penalty of Rs 100 for each day after the first during which such failure continues, subject to a maximum of Rs one lakh; and Officer who is in default shall be liable to a penalty of not less than Rs 25,000 and in case of continuing failure, with further penalty of Rs 1,000 for each day after the first during which such failure continues, subject to a maximum of Rs one lakh.
Section 20	Section 159- Penalty for default of certain provisions	Old Penal Provision	New Penal Provision
		Person in default: Imprisonment: Upto 6 months; or Fine : Upto Rs 50,000 and where the contravention is a continuing one, with a further fine which may extend to Rs 5,000 for every day after the first during which the contravention continues.	Person in default shall be liable to a penalty which may extend to Rs 50,000 and where the default is a continuing one, with a further penalty which may extend to Rs 500 for each day after the first during which such default continues.
Section 22	Section 165- Number of directorships	Old Penal Provision	New Penal Provision
		Person in default: Fine : Rs 5,000 to Rs 25,000 for every day after the first during which the contravention continues.	Person in default shall be liable to a penalty of Rs 5,000 for each day after the first during which the contravention continues.
Section 23	Section 191- Payment to director for loss of office, etc., in connection with transfer of undertaking, property or shares	Old Penal Provision	New Penal Provision
		Director in default: Fine : Rs 25,000 to Rs one lakh.	Director in default shall be liable to a penalty of Rs one lakh.
Section 24	Section 197- Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits	Old Penal Provision	New Penal Provision
		Person in default: Fine : Rs one lakh to Rs 5 lakhs.	Person in default shall be liable to a penalty of Rs one lakh and where any default has been made by a company, the company shall be liable to a penalty of Rs 5 lakhs.
Section 25	Section 203- Appointment of key managerial personnel	Old Penal Provision	New Penal Provision
		Company: Fine: Rs 1 lakh to Rs 5 lakhs; and Officer in default: Fine: Upto Rs 50,000 and where the contravention is a continuing one, with a further fine which may extend to Rs 1,000 for every day after the first during the contravention continues.	Company shall be liable to a penalty Rs 5 lakhs; and Every director and KMP who is in default shall be liable to a penalty of Rs 50,000 and where the default is a continuing one, with a further penalty of Rs 1,000 for every day after the first during which such default continues but not exceeding Rs 5 lakhs.
Section 26	Section 238- Registration of offer of schemes involving transfer of shares	Old Penal Provision	New Penal Provision
		Director in default: Fine: Rs 25,000 to Rs five lakhs.	Director in default shall be liable to a penalty of Rs one lakh.
Adjudication of Penalties
Section 31	Section 454- Adjudication of penalties	Now, apart from levying penalty in case of default, the Adjudicating officer has also been empowered to direct rectification of the default.
Section 32	Section 454A- Penalty for repeated default (new section)	A new section 454A has been inserted to provide that where a penalty in relation to a default has been imposed on a person under the Act, and the person commits the same default within a period of 3 years from the date of order imposing such penalty, passing by the adjudicating officer or RD, as the case may be, it or he shall be liable for the second and every subsequent defaults for an amount equal to twice the amount provided for such default under the relevant provision of the Act.
Others
Section 9	Section 86- Punishment for contravention	New sub-section (2) has been added: If any person willfully furnishes any false or incorrect information or knowingly suppresses any material information, required to be registered in accordance with the provisions of section 77 (Registration of Charge), he shall be liable for action under section 447.
Section 10	Section 87- Rectification by Central Government in register of charges	Due to amendments in the provision of section 77, the power of the Central Government to condone delay in respect of registration/modification of charge has been omitted.
Section 11	Section 90- Register of significant beneficial owners in a company	If no person files an application before NCLT for lifting of the restrictions on the exercise of rights attached to the shares within a period of one year, such shares shall be transferred to IEPF without any restrictions. The punishment for contravention of section 90(1) has been enhanced to include imprisonment for a term which may extend to one year or with fine which shall not be less than Rs one lakh but which may extend to Rs 10 Lakhs or with both.
Section 27	Section 248- Power of Registrar to remove name of company from register of companies	Due to insertion of section 10A and amendment in section 12, the following two new grounds has been added for removal of name of companies from the register of companies: the subscribers to the memorandum have not paid the subscription which they has undertaken to pay at the time of incorporation of a company and a declaration to this effect has not been filed within 180 days of its incorporation under section 10A(1); or the company is not carrying on any business or operations, as revealed after the physical verification carried out under section 12(9).
Section 29	Section 446B- Lesser penalties for One Person Companies or small companies	Due to amendments in the penal provisions of sections 92, 117 and 137, the word ‘fine’ has been substituted with ‘penalty’.
Section 30	Section 447- Punishment for fraud	The maximum fine has been increased from Rs 20 lakhs to Rs 50 lakhs.

Note: The change of nomenclature of punishment in case of defaults from “Fine” to “Penalty” makes such offences non-compoundable and empower RoC to adjudicate the amount of penalty payable in case of defaults, under 454 of the Act