Government has introduced The Companies (Amendment) Bill, 2020 as Bill No. 88 of 2020 to further amend Companies Act, 2013 in Lok Sabha on 17th March 2020. CLC Committee submitted its report in November, 2019. There were amendments in 66 Sections of Companies Act, 2013.
A. Objects of the Companies (Amendment) Bill, 2020
B. Key Amendments by Companies (Amendment Bill), 2020
C. Other Amendments in Brief:
1) Related to Penalty/ Fine/ Imprisonment: Out of 66 amendment approx 45 amendments are relating to amendment in penalty clause of Sections like:
2) Section 129A – New Section – Periodical Financial Result:
The Central Government may, require such class or classes of unlisted companies, as may be prescribed,—
(a) To prepare the financial results of the company on such periodical basis and in such form as may be prescribed;
(b) To obtain approval of the Board of Directors and complete audit or limited review of such periodical financial results in such manner as may be prescribed; and
(c) File a copy with the Registrar within a period of thirty days of completion of the relevant period with such fees as may be prescribed.”.
Purpose/ Effect: Purpose of insertion of this section is to empower Central Government to provide by rules such class or classes of unlisted companies to prepare periodical financial results of the company, audit or limited review thereof and their filing with Registrar within thirty days from the end of that period as specified in the rules.
3) Corporate Social Responsibility Section 135:
In sub-section (5), after the second proviso, the following proviso shall be inserted, namely:—
“Provided also that if the company spends an amount in excess of the requirements provided under this sub-section, such company may set off such excess amount against the requirement to spend under this sub-section for such number of succeeding financial years and in such manner, as may be prescribed.”
Purpose/ Effect: Purpose to allow companies, which have spent an amount in excess of the requirement provided under the said sub-section, to set off such excess amount out of their obligation in the succeeding financial years in such manner as may be provided by rules.
4) Independent Director Section 149:
In section 149 of the principal Act, in sub-section (9), the following proviso shall be inserted, namely:—
“Provided that if a company has no profits or its profits are inadequate, an independent director may receive remuneration, exclusive of any fees payable under sub-section (5) of section 197, in accordance with the provisions of Schedule V.”.
Purpose/ Effect: a new proviso which provides that an independent director may receive remuneration, if a company has no profits or inadequate profits in accordance with Schedule V of the Act.
5) Remuneration to Directors- Section 197:
(3) Notwithstanding anything contained in sub-sections (1) and (2), but subject to the provisions of Schedule V, if, in any financial year, a company has no profits or its profits are inadequate, the company shall not pay to its directors, including any managing or wholetime director or manager or any other non-executive director, including an independent director, by way of remuneration any sum exclusive of any fees payable to directors under sub-section (5) hereunder except in accordance with the provisions of Schedule V .
Purpose/ Effect: Purpose if a company fails to make profits or makes inadequate profits in a financial year, any non-executive director of such company, including an independent director, shall be paid remuneration in accordance with Schedule V of the Act
6) Right Issue of Shares Section 62:
The offer shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days “or such lesser number of days as may be prescribed” and not exceeding thirty days from the date of the offer within which the offer, if not accepted, shall be deemed to have been declined;]
7) Section 117(3)(g):
In sub-section (3), in clause (g), for the second proviso, the following proviso shall be substituted, namely:—
“Provided further that nothing contained in this clause shall apply in respect of a resolution passed to grant loans, or give guarantee or provide security in respect of loans under clause (f) of sub-section (3) of section 179 in the ordinary course of its business by,—
(a) a banking company;
(b) any class of non-banking financial company registered under Chapter IIIB of the Reserve Bank of India Act, 1934, as may be prescribed in consultation with the Reserve Bank of India;
(c) any class of housing finance company registered under the National Housing Bank Act, 1987, as may be prescribed in consultation with the National Housing Bank; and.”.
8) Producer Company – Chapter XXIA
Provisions of Producer Company added after Section 378 as 378A to 378ZU.
Purpose/ Effect: to insert a new Chapter as Chapter XXIA relating to Producer Companies on similar lines as provided in the Companies Act, 1956.
(contacted at email@example.com)