MAJOR AMENDMENTS IN THE COMPANIES ACT, 2013 BROUGHT ABOUT BY THE COMPANIES (AMENDMENT) ACT, 2019
The Companies (Amendment) Act, 2019 which came into force on the 31st July, 2019 has brought about major amendments in The Companies Act, 2013. Some of the highlights are as under –
1. SECTION 2: APPROVAL OF CENTRAL GOVERNMENT REQUIRED FOR ADOPTION OF DIFFERENT FINANCIAL YEAR
According to the provisions of Section 2 of The Companies Act, 2013, where any company, being a holding, subsidiary or associate of a company incorporated outside India is required to adopt a different financial year for the purposes of consolidation of its accounts, then such approval shall be obtained from the Central Government. Previously the authority to accord such approval lied with the Tribunal.
2. SECTION 10A: REQUIREMENTS TO OBTAIN THE COMMENCEMENT OF BUSINESS
A company having share capital and incorporated after the commencement of The Companies (Amendment) Act, 2019 shall not commence business or borrow funds unless –
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- every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and
- A verification of its registered office as provided in sub-section (2) of section 12 has been filed.
In case of default, penal provisions are attractive. Where no declaration has been filed with the Registrar as aforesaid and the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may, without prejudice to the provisions of imposition of penalties initiate action for the removal of the name of the company from the register of companies.
3. SECTION 29: DEMATERIALISATION OF SECURITIES ISSUED BY PRIVATE COMPANIES IS ON THE CARDS
The term “Public” has been omitted under Section 29 of the said Act. The Central Government may now prescribe the class or classes of companies which shall be mandatorily required to issue securities in dematerialised form. This means that the private company too, may fall a prey to the requirement of this Section.
4. SECTION 135: CSR IS NOW MANDATORY, AND UNSPENT AMOUNTS WILL GO TO PM’S FUNDS
The unspent amount on CSR activities shall have to be transferred to the Funds as provided for in Schedule VII to the Act such as PM’s National Relief Fund. Of the unspent amount too, the companies may retain funds for ongoing projects. Such amount shall be transferred within a period of thirty days from the end of the financial year to “Unspent Corporate Social Responsibility Account”, wherein it shall be spent within three financial years, failing which, it shall again be transferred to the aforesaid fund within a period of thirty days from the date of completion of the third financial year.
5. SECTION 241: UNFIT AND IMPROPER PERSONS NOT TO MANAGE COMPANY
Where any managerial person is found guilty of fraud, misfeasance, persistent negligence or default in carrying out his obligations and functions under the law or of breach of trust, or the business of a company is not or has not been conducted and managed in accordance with sound business principles or prudent commercial practices or is or has likely to cause injury to the interests of public, trade, commerce or industry, then the Central Government may initiate a case against the concerned person in the Tribunal. If an order is passed against him, he shall not hold the concerned office for a period of five years from the date of the said decision.
6. IMPROVEMENT OF THE EXISTING PROSECUTION SYSTEM
The Companies (Amendment) Act, 2019 aims to improve the existing prosecution system by imposition of stricter penalties, under various sections, on the companies as well as the officers in default. Although this will increase the monetary burden on the company but will gradually help to reduce non-compliances.
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