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The Companies (Amendment) Bill, 2019

Key Highlights of the Bill

The Companies (Amendment) Bill, 2019 was introduced in Lok Sabha on July 25, 2019 by the Minister of Finance, Ms. Nirmala Sitharaman. It seeks to amend the Companies Act, 2013. 

Provision of dematerialised shares

  • Under the Act, certain classes of public companies are required to issue shares in dematerialised form only. 
    •  The Bill states this may be prescribed for other classes of unlisted companies as well.
Re-categorisation of the Offences
  • The Bill re-categorizes 16 of the 81 offences punishable with fine or imprisonment or both as civil defaults, where adjudicating officers (appointed by the central government) may now levy penalties instead. These offences include: 
    • Issuance of shares at a discount, 
    • Failure to file annual return. 
Provision of Corporate Social Responsibility (CSR) 
  • Under the Act, if companies which have to provide for CSR, do not fully spent the funds, they must disclose the reasons for non-spending in their annual report.
    • Under the Bill, any unspent annual CSR funds must be transferred to one of the funds under Schedule 7 of the Act (e.g., PM Relief Fund) within six months of the financial year.
Check on the Auditors  
  • Under the Act, the National Financial Reporting Authority debar a member or firm from practicing as a Chartered Accountant for a period between six months to 10 years, for proven misconduct.  
    • The Bill amends the punishment to provide for debarment from appointment as an auditor or internal auditor of a company, or performing a company’s valuation, for a period between six months to 10 years.
Provisions for the Commencement of Business 
  • The Bill states that a company may not commence business, unless it 
    • Files a declaration within 180 days of incorporation, confirming that every subscriber to the Memorandum of the company has paid for the shares agreed to be taken by him;\
    • Files a verification of its registered address with the RoC within 30 days of incorporation. 
Registration of charges
  • The Act requires companies to register charges (e.g., mortgages) on their property within 30 days of creation of charge, extendable upto 300 days with the permission of the RoC.  
    • The Bill changes the deadline to 60 days (extendable by 60 days). 
Amendment in the approving authority 
  • Under the Actchange in period of financial year for a company associated with a foreign company, has to be approved by the National Company Law Tribunal.  
    • Under the Bill, these powers have been transferred to central government. 
Settlement of Disputes
  •  Under the Act, a regional director can settle offences with a penalty of up to five lakh rupees.  
    • The Bill increases this ceiling to Rs 25 lakh. 
Debarring Holding of the Office 
  • Under the Act, the central government or certain shareholders can apply to the NCLT for relief against mismanagement of the affairs of the company.  
    • The Bill states that in such a complaint, the government may also make a case against an officer of the company on the ground that he is not fit to hold office in the company, for reasons such as fraud or negligence.  
    • Also, If the NCLT passes an order against the officer, he will not be eligible to hold office in any company for five years.
Provision of the Beneficial ownership 
  • If a person holds beneficial interest of at least 25% shares in a company or exercises significant influence or control over the company, he is required to make a declaration of his interest.  
    • The Bill requires every company to take steps to identify an individual who is a significant beneficial owner and require their compliance under the Act.

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