Companies (Amendment) Ordinance, 2019 -A move towards decriminalization of offences the Companies Act, 2013
The Government of India Promulgated the Companies (Amendment) Ordinance, 2019 on January 12, 2019 to give continuing effect to the Companies (Amendment) Ordinance, 2018 and to amend the Companies Act, 2013. This is notable that the companies (Amendment) Ordinance, 2019 has a significant difference its precursor.
As an Ordinance comes with an expiry date i.e. 6 weeks from the re-assembly of the Houses of the Parliament, it was necessary to pass the Ordinance by the Houses of the Parliament in order to imbibe the amendments in the Act. The re-assembly of the Houses of the Parliament started from December 11, 2018 and continued till January 08, 2019 and the Ordinance got its approval from the House of People on January 04, 2019 but considering other exigent matters, it could not be taken up for passing by the Council of States.
Therefore, as the Ordinance will cease to operate on January 21, 2019, so in order to have a continued effect of the amendments brought in by the Ordinance, the Ordinance have been repealed by Companies (Amendment) Ordinance, 2019 on January 12, 2019.
The write-up covers the snapshot of the changes brought in the Companies Act, 2013 by the Ordinance which is subsequently repealed and replaced by Ordinance, 2019.
♦ The main reforms undertaken through the Ordinance include the following:
THE AMEDMENTS AND ITS INFLUENCE
Section 2(41): Definition of “financial year”
Section 10A: Commencement of Business, etc.
Section 12: Registered office of company
Section 14: Alteration of Articles
Section 77: Duty to register charges, etc.
Section 86: Punishment of contravention
Section 87: Rectification by Central Government in register of charges
Section 90: Register of significant beneficial owners in a company
Section 164: Disqualification of director
Section 197: Overall maximum managerial remuneration in case of inadequacy of profits
Section 248: Power of the Registrar to remove the name of the company
Section 441: Compounding of offences
Section 454- Adjudication of penalties;
Section 454A: Penalty for repeated default
CHANGES IN THE PENAL PROVISIONS
Section No. |
Default |
Penal provisions as per the erstwhile Section |
Recommendations of Injeti Srinivas Committee |
Penal provisions as per the Ordinance |
Section 10A: Commencement of Business, etc. |
Failure to furnish declaration under the section |
No such provision |
No such recommendation |
Company: Rs.50,000/-Officer- in- default: Rs.1,000/- for each day to maximum Rs.1,00,000/- |
Section 53:Prohibition of issue of shares at Discount |
Issue of shares at a discount |
Company:Minimum Fine of Rs. 1,00,000/-Maximum Fine of Rs.5,00,000/-Officer in Default:Minimum Fine of Rs. 1,00,000/-Maximum Fine of Rs. 5,00,000/- |
As technical in nature should be brought under in-house adjudication |
Company & Officer in Default: Amount raised or Rs.5,00,000/-Company :
|
Section 64:Notice for alteration of share capital |
Non-filing of notice with Registrar for alteration of share capital of the Company |
Company & Officer in default:Minimum Fine of Rs.1,000/- per dayMaximum Fine of Rs.5,00,000/- |
As technical in nature should be brought under in-house adjudication |
Company & Officer in default:Minimum Fine Penalty of Rs.1,000/- per dayMaximum Fine Penalty of Rs.5,00,000/- |
Section 90:Significant Beneficial Ownership |
Person fails to make declaration |
No such provision |
The Committee recommended that contravention of the provisions of section 90 should include prosecution and should not be limited to only penalty/ fine. |
Imprisonment of 1 year or with the fine applicable and may even be levied fine and imprisonment both. |
Section 92:Annual Return |
Non-filing of Annual Return (MGT-7) |
Company:Minimum Fine of Rs.50,000/-Maximum Fine of Rs.5,00,000/-Officer in default:Imprisonment of 6 monthsOrMinimum Fine of Rs.50,000/-Maximum Fine of Rs.5,00,000/- |
These defaults are substantial violations which directly affects the status of the Company, therefore, involves large public interest. Hence this cannot be brought under the regime of in-house adjudication. However, the Ordinance did not accept the recommendation of the Committee. |
Company & Officer in default:Minimum Fine Penalty of Rs.50,000/-Further Penalty of Rs.100/- per dayMaximum Fine Penalty of Rs.5,00,000/- |
Section 102:Statement to be annexed to the Notice |
Mis- statement in Explanatory statement |
Every promoter, director, manager or other KMP who is in default shall be punishable with fine which may extend to Rs.50,000/- or 5 times the amount of benefit accruing to the promoter, director, manager or other key managerial personnel or any of his relatives, whichever is more. |
As technical in nature should be brought under in-house adjudication |
Every promoter, director, manager or other KMP who is in default shall be punishable with finePenalty which may extend to Rs.50,000/- or 5 times the amount of benefit accruing to the promoter, director, manager or other key managerial personnel or any of his relatives, whichever is more. |
Section 105:Proxies |
Notice of General Meeting to contain clause for proxies |
Company and Officer in Default:Fine of Rs.5,000/- |
As technical in nature should be brought under in-house adjudication |
Company and Officer in Default:Fine Penalty of Rs.5,000/- |
Section 117:Resolutions and agreements to be filed |
Non-filing of MGT-14 |
Company:Minimum Fine of Rs.1,00,000/-Maximum Fine of Rs.25,00,000/-Officer in default:Minimum Fine of Rs.50,000/-Maximum Fine of Rs.5,00,000/- |
As technical in nature should be brought under in-house adjudication |
Company:Minimum Fine Penalty of Rs.1,00,000/-Further, Penalty of Rs.5,00/- everydayMaximum Fine Penalty of Rs.25,00,000/-Officer in default:Minimum Fine Penalty of Rs.50,000/-Further Penalty of Rs.5,00/- per dayMaximum Fine Penalty of Rs.5,00,000/- |
Section 121:Report on Annual General Meeting |
Non-filing of MGT-15 |
Company:Minimum Fine of Rs.1,00,000/-Maximum Fine of Rs.5,00,000/-Officer in default:Minimum Fine of Rs.25,000/-Maximum Fine of Rs.1,00,000/- |
As technical in nature should be brought under in-house adjudication |
Company:Minimum Fine Penalty of Rs.1,00,000/-Further Penalty of Rs.500/- per dayMaximum Fine Penalty of Rs.5,00,000/-Officer in default:Minimum Fine Penalty of Rs.25,000/-Further Penalty of Rs.500/- per dayMaximum Fine Penalty of Rs.1,00,000/- |
Section 137:Filing of Financial Statements |
Failure in filing financial statements with the Registrar |
Company:Fine of Rs.1,000/- everydayMaximum Fine of Rs.10,00,000/-Officer in default:Imprisonment of term of 6 monthsMinimum Fine Rs.1,00,000/-Maximum Fine Rs.5,00,000/- |
As technical in nature should be brought under in-house adjudication |
Company:Fine Penalty of Rs.1,000/- everydayMaximum Penalty of Rs.10,00,000/-Officer in default:Minimum Fine Penalty Rs.1,00,000/-Further Penalty Rs.100/- per dayMaximum Fine Penalty Rs.5,00,000/- |
Section 140:Resignation of Auditor |
Non-filing of e-Form ADT-3 |
Auditor:Minimum Fine of Rs.50,000/- or amount equal to remuneration of auditor, whichever is less Maximum Fine of Rs.5,00,000/- |
As technical in nature should be brought under in-house adjudication |
Auditor:Minimum Fine Penalty of Rs.50,000/- or amount equal to remunerationFurther penalty of Rs.500/- every dayMaximum Fine Penalty of Rs.5,00,000/- |
Section 157(2):Intimation of DIN |
Failure to intimate DIN of directors to the Registrar |
Company:Minimum Fine of Rs.25,000/-Maximum Fine of Rs.1,00,000/-Officer in default:Minimum Fine of Rs.25,000/-Maximum Fine of Rs.1,00,000/- |
As technical in nature should be brought under in-house adjudication |
Company:Minimum Fine Penalty of Rs.25,000/-Maximum Fine Penalty of Rs.1,00,000/-Further Penalty of Rs.100/- per dayOfficer in default:Minimum Fine Penalty of Rs.25,000/-Maximum Fine Penalty of Rs.1,00,000/- |
Section 159:Punishment for contravention of sections 152, 155, and 156 |
Punishment for contravention of sections 152, 155, and 156 |
Individual or Director:Imprisonment of 6 monthsOrMinimum Fine of Rs.50,000/-Further Fine of Rs.500/- per day |
As technical in nature should be brought under in-house adjudication |
Individual or Director:Imprisonment of 6 monthsOrMinimum Fine Penalty of Rs.50,000/-Further Fine Penalty of Rs.500/- |
Section 165:Number of directorships |
Non-compliance of permissible number of directorship by director |
Director:Minimum Fine of Rs.5,000/-Maximum Fine of Rs.25,000/- |
Offences under this section are technical and can be penalized by initiating a summary proceedings. Hence, such offences should be shifted to in-house adjudication. |
Director:Penalty of Rs.5,000/- per dayMinimum Fine of Rs. 5000Maximum Fine of Rs. 25,000 |
Section 191:Payment to Director for loss of office |
Contravention of the section |
Director:Minimum Fine of Rs.25,000/-Maximum Fine of Rs.1,00,000/- |
Offences under this section are technical and can be penalized by initiating a summary proceedings. Hence, such offences should be shifted to in-house adjudication. |
Director:Minimum Fine of Rs. 25,000Maximum Fine Penalty of Rs.1,00,000/- |
Section 197:Overall maximum managerial remuneration in case of inadequacy of profits |
Non-compliance of the provisions of the section |
Minimum Fine of Rs.1,00,000/-Maximum Fine of Rs.5,00,000/- |
As technical in nature should be brought under in-house adjudication |
Minimum Fine Penalty of Rs.1,00,000/-Maximum Fine Penalty of Rs.5,00,000/- |
Section 203:Appointment of KMP |
Default in appointment of Key Managerial Personnel |
Company:Minimum Fine of Rs.1,00,000/-Maximum Fine of Rs.5,00,000/-Director/KMP/Officer in default:Minimum Fine of Rs.50,000/-Further Fine of Rs.1,000/- everyday |
As technical in nature should be brought under in-house adjudication. |
Company:Minimum Fine of Rs. 1 LakhMaximum Fine Penalty of Rs.5,00,000/-Director/KMP/Officer in default:Minimum Fine Penalty of Rs.50,000/-Further Fine Penalty of Rs.1,000/- everydayMaximum Penalty of Rs.5,00,000/- |
Section 238:Registration of offer of schemes involving transfer of shares |
Contravention of the section |
Director:Minimum Fine of Rs.25,000/-Maximum Fine of Rs.5,00,000/- |
As technical in nature should be brought under in-house adjudication |
Director:Minimum Fine of Rs. 25,000Maximum Fine of Rs. 5 LakhPenalty of Rs.1,00,000/- |
Section 446B:Application of Fines |
Default in filing annual return by OPC and small company |
½ of fine or imprisonment or both as may be specified in section 92(5) of the Act |
No such recommendations |
½ of fine penalty or imprisonment or both as may be specified in section 92(5) of the Act |
Section 447:Punishment for fraud |
Penal provisions for fraud involving Rs.10,00,000/- or 1% of turnover and does not involve public interest |
Any person guilty:Imprisonment of 5 yearsOrFine of Rs.25,00,000/- |
The committee recommended that the maximum fine under section 447 be increased from Rs.20,00,000/- to Rs.50,00,000/- |
Any person guilty:Imprisonment of 5 yearsOrFine of Rs. 25 50,00,000/- |
To conclude it may be said that the amendments introduced in the Ordinance are primarily to re-categorize the existing penal provisions as civil defaults for those provisions which are more likely of administrative nature as recommended by the Injeti Srinivas Committee. In view of the amendments, it is definitely a welcome step towards ensuring corporate compliance in a systematic manner.
Read. Thanks.
Nice write up
Keep it up
CS K K Kohli