Introduction
The Ministry of Law and Justice have brought certain amendments in 31 sections of the Companies Act, 2013 vide its Ordinance dated 2nd November, 2018 viz. Companies (Amendment) Ordinance, 2018 (Ordinance) effective from 02.11.2018.
Synopsis of the same is hereunder:
| SECTION | PARTICULARS | PRE ORDINANCE- Provisions | POST ORDINANCE- Provisions |
| Section 2 | “financial year” | Application for adopting a different year as “financial year” – “Tribunal” | a. Associate Company is also inserted along with Holding and Subsidiary outside India.
b. “Tribunal” substituted with “Central Government ” |
| Section 10A | Commencement of Business, etc. | No Such provision was there | Company shall not commence any business or exercise any borrowing powers unless:
10A (1) A declaration is filed by a Director within a period of 180 days from incorporation date declaring that every subscriber to the MOA has paid the value of the shares as agreed for. and 10A (2) The company has verified its registered office in e-Form INC-22. In case of defaults, penalty is as follows: If default is made in compliance of provisions of Section 10A (1), ROC may have reasonable cause to remove the name of the Company from the register of Companies without prejudicing below penalty. Company shall pay – Rs. 50000/- & OID – Rs. 1000 for each day to Max. Rs. 1 Lakh. |
| Section 12 | Registered office of company | No Such provision was there | Insertion of section 12 (9): If ROC has reasonable cause to believe that the Company is not carrying business or operations, he may, without prejudice to Section 12 (8), remove the name of the company from the register of companies. |
| Section 14 | Alteration of Articles | Proviso relating to conversion of Public Company into Private Limited Company approval of “Tribunal” is required. | “Tribunal” is substituted with “Central Govt.” |
| Section 53 | Prohibition on issue of shares at discount | Penal provisions
Company- Min.1 Lakh- Max. 5 Lakh OID – Imprisonment may be upto 6 months or fine min. 1 Lakh – Max 5 Lakh or both. |
Non-compliance of sub-section (1) & (2) of Section 53 shall attract penalty as follows: Such company and OID shall be liable to a penalty which is as follows: i. Which may be extended equal to an amount raised through issue of shares at discount or 5 Lakh whichever is less: Penal provisions- The Company shall refund the amount along with 12% p.a. interest rate till the date of making payment. |
| Section 64 | Notice to be given to Registrar for alteration of share capital | A Company has to file a notice in Form SH-7 with the Registrar within a period of 30 Days of such alteration or increase or redemption along with an altered memorandum
In case defaults, the company or officer-in-default shall be with Rs. 1000 for each day during default or Rs. 5 Lakh, whichever is less. |
Here amendment is only w.r.t. penalty in case of defaults:
Now both are covered, the company as well as officer-in-default shall be with Rs. 1000 for each day during default or Rs. 5 Lakh, whichever is less. |
| Section 77 | Duty to register charges, etc. | Company can get registered its charge with RoC to register charges within 300 days of such creation | Now, w.e.f. RoC to register charges within 60 days of such creation. In case the charge is not registered within such time, RoC may on application, allow the registration of the charge within a period of further 60 days on payment of ad valorem fees. After 120 days charge cannot be registered. Ø No charge created by a company shall be taken into account by the liquidator “appointed under this Act or the Insolvency and Bankruptcy Code, 2016, as the case may be,” or any other creditor unless it is duly registered under sub-section (1) and a certificate of registration of such charge is given by the Registrar under sub-section (2).-Impt. |
| Section 86 | Punishment of contravention | If any company contravenes any provision of this Chapter, the Company shall be punishable with fine which shall not be less than 1 Lakh to 10 Lakh rupees and OID shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than 25,000 to 1,00,000/-. | New sub section inserted: if any person willfully furnishes of false or incorrect information or knowingly suppressing any material information pertaining to registration of charges shall be liable to fraud and attract action under Section 447. |
| Section 87 | Rectification by Central Government in Register of charges | Section substituted | CG on satisfaction that-
a. Omission in giving intimation to the ROC regarding satisfaction of charge within the prescribed time, c. Omission or misstatement of an particulars w.r.t. any such charge or modification of charge or w.r.t any memorandum of satisfaction or other entry made u/s 82 or 83, was accidental or inadvertently made may direct for extending the time for intimating about the satisfaction of charge and rectification of the misstatement or omission made. Impt. Note: Earlier Creation or Modification was also covered but now company, in any case, has to file creating and modification within 120 days, as mentioned as above. |
| Section 90 | Register of significant beneficial owners in a company | The company or the person aggrieved by the order of the Tribunal may make an application to the Tribunal for relaxation or lifting of the restrictions placed under sub-section (8). Penal provision: Company and OID: 1000000 – 5000000 and continuing failure, further fine may be upto 1,000/- for every day after the first during which the failure continues. |
Inserted time period: An aggrieved person may make application to tribunal within one year from the date of such order.
Provided that, No application filed within period of one Year ‘Shares shall be transferred to the authority constituted u/s 125(5). Penal provision: Imprisonment upto one year or both included for OID |
| Section 92 | Annual Return | Failure/delay in filing annual return Penal provisions- Company- 50,000-5,00,000
OID – Imp. Upto 6 months or 50 Thousand – 5 Lakh or both. |
Now : No imprisonment Penal Provisions-
Company and OID: flat Rs. 50000. In case of continuing default, penalty of Rs. 100 for each day upto max. Rs. 5 Lakh. |
| Section 102 | Statement to be annexed to notice | Fine was levying: Promoter, director, manager or other key managerial personnel: may be extended to 50000 or 5 times the amount of benefit accruing the promoter, director, manager or other key managerial personnel or any of his relatives, whichever is more | Penal provisions instead of levying fine- Now fine is Flat: Rs. 50000 or five times the benefited amount rest things are same. |
| Section 105 | Proxies | Fine only Officer in default : punishable with fine which may extend to five thousand rupees | Penal provisions instead of levying fine-
Flat Penalty: of Rs. 5000. |
| Section 117 | Resolutions and agreements to be filed | Fine only Company: 100000 – 500000
And Officer in default, including liquidator of the company, if any : 50000- 500000 |
Penal provisions instead of levying fine-
Company- Rs. 1 lakh and in case of continuing failure, Rs. 500 for each day upto max. Rs. 25 lakh; Officer-in-default (including liquidator)- Rs. 50 Thousand and in case of continuing failure, Rs. 500 for each day upto max. Rs. 5 lakh |
| Section 121 | Report on Annual General Meeting ◦(Applicable on Listed Company) | Fine only Company: 100000 – 500000
Officer in default : 25000-100000 |
Failure to file the report shall attract a penalty- Company- Rs. 1 lakh and in case of continuing default, Rs. 500 for each day upto max. 5 lakh. Officer-in-default- Rs. 25000 and in case of continuing default, a further penalty of Rs. 500 each day upto max. Rs. 1 Lakh. |
| Section – 137 | Filing of Financial Statements | Fine or imprisonment or both Company: one thousand rupees for every day during which the failure continues but which shall not be more than Ten Lakh rupees
MD, CFO & other Directors: Imp. Upto 6 months or 100000 – 500000 or both |
Penal provisions instead of levying fine-
The Ordinance has categorised such default as a ‘civil default’ by substituting fine with penalty. |
| Section – 140 | Resignation of Auditor | Fails to file e-Form ADT-3 within 30 days of his resignation shall attract a fine-
Auditor: 50000 or remuneration of Auditor, whichever is less, but which may extend to five lakh rupees. |
Fails to file e-Form ADT-3 within 30 days of his resignation shall attract a penalty-
Auditor: 50000 or remuneration of Auditor, whichever is less, with an everyday penalty of Rs. 5000 if the failure continues. |
| Section 157(2) | Intimation of DIN | Fine only Company and officer in default : 25000-100000 | The fine under section 157 for not furnishing DIN to the Registrar has been substituted with penalty. However, the sub-section now specifically provides that if the default continues a further penalty of rupees one hundred shall be levied every day. |
| Section 159 | Punishment for contravention of sections 152, 155 and 156 | Fine or imprisonment or both Individual or director of the company:
Imprisonment upto 6 months or upto 50000 and where the contravention is a continuing one, with a further fine which may extend to 500 for every day. |
Section 152, 155 and 156 of the Act list downs the provisions for appointment of director, allotment of DIN and intimation of DIN. The penalty for contravention of this section has been shifted to civil liability i.e. the word fine is substituted with penalty. |
| Section 164 | Disqualifications of Director | No person, after the commencement of this Act, shall hold office as a director, including any alternate directorship, in more than twenty companies at the same time. | In sub-section (1) a new sub-clause (i) has been inserted.
Breach in Maximum no of Directorships to be a Ground for Disqualification. |
| Section 165 | Number of Directorships | If a person accepts an appointment as a director in contravention of sub-section (1), he shall be punishable with fine which shall not be less than five thousand rupees but which may extend to twenty-five thousand rupees for every day after the first during which the contravention continues. | If a director contravenes the maximum limit of directorship as provided in section 165 of the Act, he/she shall be punishable with a penalty of rupees five thousand everyday till the contravention continues.
On similar lines, the default under this section has been categorised as a ‘civil default’ with the defaulting company and officers liable to penalty only. |
| Section 191 | Payment to director for loss of office | If a director of the company contravenes the provisions of this section, such director shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees. | The punishment for default under this section has been shifted to civil liability. Accordingly, the director shall be punishable with penalty of rupees one lakh for any contravention under this section. |
| Section 197 | Overall maximum managerial remuneration in case of inadequacy of profits | “(7) Notwithstanding anything contained in any other provision of this Act but subject to the provisions of this section, an independent director shall not be entitled to any stock option and may receive remuneration by way of fees provided under sub-section (5), reimbursement of expenses for participation in the Board and other meetings and profit related commission as may be approved by the members” | The whole sub-section (7) shall be omitted. Therefore, now the IDs can be entitled to stock options.
If company contravenes the provisions of this section it shall be liable for minimum penalty of rupees one lakh which may extend upto five lakhs. |
| Section 203 | Appointment of KMP | If a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every director and key managerial personnel of the company who is in default shall be punishable with fine which may extend to fifty thousand rupees and where the contravention is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the contravention continues. | Now following things have been substituted Such: Contravention into Defaults and
Fine into penalty Penalty of Rs. 5 Lakh flat on the company, in case of default OID: Rs. 50 Thousand In case of continuing defaults, penalty of Rs. 1000 per day till the default make good subject to max to Rs. 5 Lakh |
| Section 238 | Registration of offer of schemes involving transfer of shares | The director, who issues a circular which has not been presented for registration and registered under clause (c) of sub-section (1), shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees. | Now flat Penalty of Rupees One lakh has been provided. |
| Section 248 | Power of the Registrar to remove the name of the company | Provisions of the Act provided the following situations in which the Registrar can remove the name of the Company from the register of companies:
a) It has failed to commence its business within one year of incorporation b) Is not carrying out any business or operations for a period of two years c) Is a dormant company under section 455 |
The Ordinance has introduced two new clauses for removal of name of the Company:
i) if the subscribers of MoA of the Company have not paid the subscription amount and have not furnished a declaration in this regard within 180 days ii) if the Company is revealed to not having any registered office after physical verification of registered office. |
| Section 441 | Compounding of offences | Power of Regional Director to compound offence punishable increased upto Rs. 5,00,000/- | a) Power of Regional Director to compound offence punishable increased upto Rs. 2,500,000/-
b) Ordinance has provided clarification that offences which are punishable with imprisonment only or with imprisonment and fine shall not be compoundable |
| Section 446B | Application of fines | Fine only | The penal provisions for any default in the annual return of a OPC or small company has been shifted from fine to penalty. |
| Section 447 | Punishment for Fraud | The section provided that where the fraud involves an amount less than Rs. 10 lakh or 1% of the turnover of the company and did not involve public interest the defaulter shall be punishable with imprisonment for a term which may extend to 5years or with fine which may extend to twenty lakh rupees or with both. | The section provided that where the fraud involves an amount less than Rs. 10 lakh or 1% of the turnover of the company and did not involve public interest the defaulter shall be punishable with imprisonment for a term which may extend to 5years and the maximum fine under section 447 has be increased from Rs.20 lakhs to Rs. 50 lakhs. |
| Section 454 | Adjudication of penalties | (i) Where company does not pay the penalty imposed by the adjudicating officer or the Regional Director within a period of ninety days from the date of the receipt of the copy of the order, the company shall be punishable with fine which shall not be less than twenty five thousand rupees but which may extend to five lakh rupees.
(ii) Where an officer of a company who is in default does not pay the penalty within a period of ninety days from the date of the receipt of the copy of the order, such officer shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both. |
a) Adjudicating officer can now impose penalty on company, officer in default, or any other person
b) can provide any direction to the company or officer in default or any other person The erstwhile provisions only provided for officer in default. We assume that introduction of the word ‘any other person’ shall widen the power of the adjudicating officer. |
| Section 454A | Penalty for repeated default | New section inserted | For repeated default within 3 years double penalty shall be imposed |
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