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Key Points – Companies (Amendment) Ordinance, 2018 With Corresponding Sections of Companies Act, 2013
On President’s assent to promulgation, Companies Act, 2013 has been amended through Companies (Amendment) Ordinance, 2018 passed by Ministry of Law and Justice on 2nd November, 2018. Major amendments along with their Corresponding sections of the Companies Act, 2013 are being listed below: –
| Removal of Clog from NCLT | |
| Section – Companies (Amendment) Ordinance, 2018 | Corresponding Section of Companies Act, 2013 |
| Section 2 | Section 2(41)- Definition of ‘Financial year’ |
| Amendments:- 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. |
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| 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. |
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| Pertaining 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. |
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| 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 ad valorem 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. |
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| 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. |
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| Re-categorising of offences to an in-house adjudication framework from compoundable offences | |
| Section 6 | Section 53- Prohibition on issue of shares at discount |
| Old Penal Provision: Company: Fine of 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 bothNew Penal Provision: 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. |
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| Section 7 | Section 64- Notice to be given to Registrar for alteration of share capital |
| Old Penal Provision: Company and Officer in default: Fine of Upto Rs 1,000 for each day during which such default continues, or Rs 5 lakhs, whichever is lessNew Penal Provision: 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. |
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| Section 12 | Section 92- Annual return |
| Old Penal Provision: Company: Fine of 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 bothNew Penal Provision: 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. |
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| Section 13 | Section 102- Statement to be annexed to notice |
| Old 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.New Penal Provision: 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. |
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| Section 14 | Section 105- Proxies |
| Old Penal Provision: Officer who is in default: Fine of Upto Rs 5,000.New Penal Provision: Officer who is in default shall be liable to a penalty of Rs 5,000. |
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| Section 15 | Section 117- Resolutions and agreements to be filed |
| Old Penal Provision: Company: Fine of Rs 1 lakh to Rs 25 lakhs; and Officer in default including liquidator: Fine: Rs 50,000 to Rs 5 lakhsNew Penal Provision: 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. |
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| Section 16 | Section 121- Report on annual general meeting |
| Old Penal Provision: Company: Fine of Rs 1 lakh to Rs 25 lakhs; and Officer in default: Fine: Rs 25,000 to Rs one lakh.New Penal Provision: 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. |
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| Section 17 | Section 137- Copy of financial statement to be filed with Registrar |
| Old 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 bothNew Penal Provision: 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 |
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| Section 18 | Section 140- Removal, resignation of auditor and giving of special notice |
| Old Penal Provision: Auditor in default: Fine: not less than Rs 50,000 or the remuneration of the auditor, whichever is less but which may extend to Rs 5 lakhs.New Penal Provision: 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. |
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| Section 19 | Section 157- Company to inform Director Identification Number to Registrar |
| Old Penal Provision: Company: Fine: Rs 25,000 to Rs one lakh; and Officer in default: Fine: Rs 25,000 to Rs one lakh.New Penal Provision: 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. |
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| Section 20 | Section 159- Penalty for default of certain provisions |
| Old 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.New Penal Provision: 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. |
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| Section 22 | Section 165- Number of directorships |
| Old Penal Provision: Person in default: Fine: Rs 5,000 to Rs 25,000 for every day after the first during which the contravention continues.New Penal Provision: Person in default shall be liable to a penalty of Rs 5,000 for each day after the first during which the contravention continues. |
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| Section 23 | Section 191- Payment to director for loss of office, etc., in connection with transfer of undertaking, property or shares |
| Old Penal Provision: Director in default: Fine: Rs 25,000 to Rs one lakh.New Penal Provision: Director in default shall be liable to a penalty of Rs one lakh. |
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| Section 24 | Section 197- Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits |
| Old Penal Provision: Person in default: Fine : Rs one lakh to Rs 5 lakhs.New Penal Provision: 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. |
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| Section 25 | Section 203- Appointment of key managerial personnel |
| Old 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.New Penal Provision: 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. |
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| Section 26 | Section 238- Registration of offer of schemes involving transfer of shares |
| Old Penal Provision: Director in default: Fine: Rs 25,000 to Rs five lakhs.New Penal Provision: Director in default shall be liable to a penalty of Rs one lakh. |
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| 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. |
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| 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. |
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| 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. |
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| 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 from “Fine” to “Penalty” in case of defaults, makes such offences non-compoundable and empower Registrar of Companies to adjudicate the amount of penalty payable, under 454 of the Act.
{The author is a Company Secretary in Practice & can be reached at (M) 9811888288 (E) [email protected]}
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useful information on key points “Key Points of Companies (Amendment) Ordinance, 2018”
Very good article. Need more coverage. Thanks.