With the objective of promoting ease of doing business and ensuring better corporate governance, the Ministry of law and justice has notified the Companies (Amendment) Ordinance, 2018 and the same has also been promulgated by the President to be effective from the even date i.e. 2nd November, 2018.
Further, the Companies (Amendment) Ordinance, 2018 has brought in major changes in the many of the provisions of the Companies Act, 2013 wherein efforts has been made to reduce the excessive burden of the Special Courts and to make the penal provisions under various provisions more specific and stringent thereby ensuring, compliance of law in true letter and spirit. In this article, we shall discuss about the major highlights of the Companies (Amendment) Ordinance, 2018 along with the impact it will have on the existing law and provisions except the penalties:
| S. No. | Relevant Section | After the Companies (Amendment) Ordinance, 2018 | Before the Companies (Amendment) Ordinance, 2018 |
| 1. | Section 2(41): Definition of financial year | An application for change of financial year shall be made to the Central Government.
Further, any applications pending with NCLT w.r.t change of financial year shall be disposed off in the manner prescribed before the commencement of the Companies (Amendment) Ordinance, 2018. |
An application for change of financial year shall be made to the Tribunal i.e. NCLT. |
| 2. | Insertion of new Section 10A: Submission of a Declaration | A company having share capital shall not commence its business:
a.) Until a declaration is filed within 180 days from the date of incorporation of the Company that every subscriber has paid the value of the shares agreed to be taken by him on the date of making such declaration; and b.) The Company has filed a verification of its registered office within 30 days in e-Form INC-22. |
There was a similar provision to file such declaration in Section 11 of the Companies Act, 2013 but the same was done away with the Companies (Amendment) Act, 2015 w.e.f. 29th May, 2015. |
| 3. | Insertion of sub-clause (9) in Section 12 after sub-section (8): Registered Office | The Registrar may cause physical verification of the registered office of the Company in case he has reasonable cause to believe that the Company is not carrying on any business or operations and in case the default is found, the Registrar may initiate action for removal of name of the Company from the register of Companies. | No such provision earlier. |
| 4. | Section 14: Alteration of Articles of Association | Application for conversion of a public Company into private Company shall be filed with the Central Government.
Further, existing application shall be disposed off in accordance with the earlier provisions. |
Authority for application for conversion of public Company into a private Company was vested with NCLT. |
| 5. | Section 77: Duty to register charges | In case the charge is created after the commencement of the Ordinance, then the same shall be registered within 60 days. Further, the Registrar may allow such registration to be made within a further period of 60 days on payment of advalorem fees. | The additional time that the Company for registration of charges with ROC was of 300 days on payment of additional fees. Further, application shall have to be made to the Central Government for registration of charges after the period of 300 days. |
| 6. | Section 86: Penalty for contravention | In case of willfully submission of wrong/false information or suppression of any material information w.r.t. registration of charges then the liability of Section 447 i.e. fraud shall be attracted. | No such provision earlier. |
| 7. | Section 90: Registrar of significant beneficial owners in a Company | a) An aggrieved person may make an application to the Tribunal within a period of one year and further, no such application shall be entertained.
b) Penal provisions: Imprisonment for period of one year has been inserted. |
No time limit for making such application to the Tribunal was there and further, the penal provisions contained only the monetary penalty. |
| 8. | Section 164: Disqualifications for appointment of Director | In case the maximum number of limits as prescribed under Section 165 i.e. 20 exceed, the same shall be the ground for disqualification of Director. | No such provision earlier. |
| 9. | Section 197(7): Remuneration in case of absence or adequacy of profits | Whole of the sub-section has been omitted and accordingly, coming out with stricter norms for Independent Directors. | Independent Directors were not entitled to stock options and may receive sitting fees, reimbursement of expenses for participation in Board and profit related commission. |
| 10. | Section 248: Power of Registrar to remove name of Company from its Register | Following two grounds has been added for compulsory striking off the Companies by the Registar:
a) Not filed declaration as discussed in point no. 2. b) Company has not filed e-Form INC-22 |
Such provisions were done away with vide Companies (Amendment) Act, 2015. |
{The author is a Company Secretary in Practice and can be reached at (M) 9999952595 and (E) cskajalgoyal@gmail.com}
Author Bio
Ref. Section 12 (9) of the Companies Act, 2013.
Has the Registrar got personnel to to cause physical verification of the Registered Office of the Companies? If one could recollect rightly, Mr. Nitin Gadkari, the Minister in the Central Government, was earlier found to have formed Companies, at the address of Registered Office, no operation was carried out.