Synopsis of Companies Amendment Bill, 2020 – Part I
With the objective of decriminalizing some more provisions of the Companies Act, 2013 and to provide further ease of living to law abiding corporate, a Company Law Committee (CLC) consisting of representatives from Ministry, industry chambers, professional institutes and legal fraternity was constituted on the 18th September, 2019.
Through this bill, it is proposed to amend various provisions of the Act to decriminalise minor procedural or technical lapses under the provisions of the said Act, into civil wrong; and considering the overall pendency of the courts, it is further proposed to remove criminality in case of defaults, which can be determined objectively and which otherwise lack any element of fraud or do not involve larger public interest. In addition, the Government also proposes to provide greater ease of living to corporates through certain other amendments to the Act.
|AMENDMENTS AIMED TO PROVIDE EASE OF DOING BUSINESS TO CORPORATES|
|Sections under Companies Act, 2013||Proposed Amendments|
|Section 2(52)||Definition of ‘listed company’||Clause 2||A new proviso is proposed to be inserted, which allows the Central Government to exclude certain Companies based on listing of certain securities on recognized stock exchange, as may be provided by rules, in consultation with SEBI from the definition of listed companies.|
|Section 16||Rectification of Name of Company||Clause 4||
|Section 23||Public Offer and Private Placement||Clause 5||
|Section 62||Further Issue of Share Capital||Clause 11||It is proposed to reduce timelines for applying for rights issues so as to speed up such issues under section 62.|
|Section 89||Declaration in Respect of Beneficial Interest in any Share||Clause 18||It is proposed to insert Section 89(11) whereby, the Central Government is empowered to exempt any class of persons from complying with any of the requirements of this section, except sub-section (10), either unconditionally or subject to such conditions as may be specified in the notification.|
|Section 117||Resolutions and Agreements to be Filed||Clause 22||The existing second proviso to Section 117(3)(g) is proposed to be substituted and in addition to a Banking Company, now it also seeks to enable the Central Government to exempt any class of NBFC’s registered under Chapter IIIB of Reserve Bank of India Act, 1934 and any class of Housing Finance Companies registered under the National Housing Bank Act, 1987 from filing of resolutions passed to grant loans or give guarantees or to provide security in respect of loans under Section 179(3)(f) of the Act in the ordinary course of their business.|
|Section 129A||Periodical financial Results||Clause 25||It is proposed to insert a new section to empower the Central Government to prescribe a class of unlisted companies which shall prepare periodical financial results of the company, conduct audit or limited review thereof and file a copy of such results with the Registrar within 30 days from the end of the relevant period.|
|Section 135||Corporate Social Responsibility||Clause 27||
|Section 149||Company to have Board of Directors||Clause 32||A new proviso is proposed to be inserted in Section 149(9), to enable Companies which have no profits or inadequate profits to pay remuneration to independent directors in accordance with Schedule V of the Act.|
|Section 197||Overall Maximum Managerial Remuneration and Managerial Remuneration in Case of Absence or Inadequacy of Profits||Clause 40||Section 197(3) is proposed to be amended to provide for payment of remuneration to any non-executive director, including an independent director if a company fails to make profits or make inadequate profits in a financial year in accordance with Schedule V of the Act.|
|Section 284||Promoters, Directors, etc., to Cooperate with Company Liquidator||Clause 46||At present Section 284(2) provides for punishment for non-cooperation with the Company Liquidator. It is proposed to substitute the above provision to allow for Company Liquidator to make an application to the Tribunal for necessary directions in case any person does not assist or cooperate with the Company Liquidator.|
|Section 302||Dissolution of Company by Tribunal||Clause 47||A procedural change is proposed in Section 302(3) of the Act. It seeks to substitute the existing sub-section to provide that the Tribunal shall forward a copy of the order of dissolution to the Registrar, and direct the Company Liquidator to also forward such copy to the Registrar, who shall record in the register relating to the company a minute of the dissolution of the company.
It is also proposed to omit sub-section (4) which provides for penalty on Company Liquidator in case of default.
|Section 348||Information as to Pending Liquidations||Clause 50||It is proposed to substitute sub-section (6) to provide that if a Company Liquidator, who is an Insolvency Professional, is in default in complying with the provisions of the section, the default will be a contravention of the Insolvency and Bankruptcy Code, 2016, and the rules and regulations made thereunder.
It is also proposed to remove the penalty provision stated under sub-section(7)
|Section 356||Powers of Tribunal to Declare Dissolution of Company Void||Clause 51||A procedural change is proposed in Section 356(2) of the Act. It seeks to substitute the existing sub-section to provide that the Tribunal shall forward a copy of the order to the Registrar, and direct the Company Liquidator or the person on whose application such order was made to also file a certified copy of the order with the Registrar within 30 days of the order.|
|Chapter XXIA||Producer Companies||Clause 52||A new chapter on Producer Companies is proposed to be introduced. It is proposed to be divided into XII Parts having Section 378A to 378ZU. It is intended to be based on similar lines as provided in the Companies Act, 1956.|
|Section 379||Application of Act to Foreign Companies||Clause 53||It is proposed to omit the proviso to sub-section (1) which empowers the Central Government to exempt any class of foreign companies from any of the provisions of sections 380 to 386, 392 and 393 by way of publishing an Order in Official Gazette.|
|Section 393A||Exemptions under Chapter XXII||Clause 55||It is proposed to insert a new Section 393A to empower the Central Government to exempt any class of foreign companies or companies incorporated or to be incorporated outside India, from any of the provisions of Chapter XXII of the Act by notification to be laid before both Houses of Parliament.|
|Section 403||Fee for Filing, etc.||Clause 56||As per the existing third proviso to Section 403(1) the minimum additional fees which may be levied for default on two or more occasions in submitting, filing, registering or recording of prescribed documents, shall not be less than twice the additional fee as applicable, however it is proposed to eliminate such minimum fees and substitute the said proviso to provide that the default may be make good on payment of such higher additional fee as may be provided by rules.|
|Section 410||Constitution of Appellate Tribunal||Clause 58||It is proposed to remove the restriction provided on the number of Judicial and Technical members that the Central Government may appoint in the Appellate Tribunal.|
|Section 418A||Benches of Appellate
|Clause 59||It is proposed to introduce a new section to provide for constitution of Benches of the Appellate Tribunal and related provisions. The Benches of the Appellate Tribunal shall hear appeals against any direction, decision or order referred to in section 53A of the Competition Act, 2002 and under section 61 of the Insolvency and Bankruptcy Code, 2016.|
|Section 435||Establishment of Special Courts||Clause 60||It is proposed to amend section 435(1) of the Act to provide that the offence under section 452 of the Act shall be excluded from the applicability of section 435 of the Act. Section 452 of the Act provides for punishment for wrongful withholding of Property.|
|Section 446B||Lesser penalties for certain companies||Clause 62||It is proposed to amend Section 446B to provide for payment of lesser monetary penalty by a start-up company, Producer Company, One Person Company or small company on failure to comply with provisions of the Act which attract monetary penalties. At present, the provision is applicable only for One person Company and Small Company in respect of certain specified sections.|
|Section 452||Punishment for Wrongful Withholding of Property||Clause 64||It is proposed to insert a new proviso to sub-section (2) to provide that the imprisonment of officer or employee of the company specified under the said sub-section shall not be ordered in case wrongful possession or withholding of a dwelling unit is concerned and such officer or employee has not received certain statutory dues from the company.|
|Section 454||Adjudication of Penalties||Clause 65||It is proposed to insert a new proviso to sub-section (3) to provide that no monetary penalty shall be imposed when such default relates to non-compliance of sub-section (4) of section 92 or sub-section (1) or sub-section (2) of section 137 and has been rectified either prior to, or within 30 days of, the issue of the notice by the adjudicating officer.|
|Section 465||Repeal of Certain Enactments and Savings||Clause 66||The first proviso to sub-section (1) provides that the provisions of Part IXA of the Companies Act, 1956 shall be applicable to a producer company. However, since the bill proposes to insert a new Chapter with regard to Producer Companies, the above said provision seeks to be omitted.|