The Companies (Amendment) Bill, 2020 received the President’s assent on 28th September 2020. The Companies (Amendment) Act, 2020 seeks to amend the Companies Act, 2013 and contains 66 clauses. It shall come into force on such dates as the Central Government may, by notification in the Official Gazette, appoint.
A. Key Highlights of the Companies (Amendment) Act, 2020
• To decriminalize certain offenses under the Act in case of defaults which can be determined objectively and which otherwise lack any element of fraud or do not involve larger public interest;
• Replacement of fine with penalty and removal of imprisonment in certain offenses
• Exempt certain companies to constitute CSR Committee [where the contribution is less than Rs. 50 lakhs]
• Allow companies to set off any excess amount spent towards CSR in subsequent financial years as may be prescribed
• Direct listing in foreign jurisdictions
• Remuneration to non-executive directors(including Independent Directors) in case of loss or inadequacy of profits
• Periodic financial results to be filed with ROC for unlisted companies as may be prescribed
• Reduce timelines for applying for rights issues so as to speed up
• A new chapter for Producer companies
• Constitution of Benches of Appellate Tribunal
• Revision in the definition of "listed company", mainly to exclude debt listed securities
• Exempt certain classes of foreign companies from Chapter 22
• Extend the benefit of lesser penalties to Producer Companies and start-ups in addition to small companies & one person companies
B. Gist of Major Amendments under the Act:
|
Section |
Heading |
Subject Matter |
|
2(52) |
Definition of Listed Company |
Proviso inserted to empower Central Govt. to exclude, in consultation with the SEBI, certain class of companies from the definition of"listed company", mainly debt listed companies. |
|
16(1)(b) 16 (3) |
Rectification of Name of Company |
Reduction of the time limit of compliance from 6 months to 3 months for the direction given by Central Govt.u/s 16(1)(b) of the Act to rectify the name of the Company. In case of default in complying with the direction u/s 16(1), Central Govt. shall allot a new name to the Company which cannot be further changed by the Company. |
|
62(1)(a)(i) |
Further Issue of Share Capital |
Reduction in the time-limit which can be less than 15 days, as may be prescribed, for the rights offer to remain open. |
|
89(11) |
Significant Beneficial Owner |
The Central Govt. may exempt any class or classes of persons from complying with any of the requirements of Section 89, except sub-section (10), if it is considered necessary to grant such exemption in the public interest. |
|
117 (3) |
Resolutions and Agreements to be Filed |
U/s 117 (3)(g), Companies were required to file Form MGT-14 for board resolutions passed u/s 179(3)(f) of the Act for giving loans, guarantees, or providing security. Now NBFC registered with RBI & registered housing finance companies are exempt from this requirement, taking care of the day to day operations. |
|
129 A |
Periodical financial results |
This section is newly inserted. Unlisted companies as may be prescribed will now be required to prepare periodical financial results of the company, along with audit report or limited review report thereof. This will be required to be filed with ROC within thirty days from the end of that period. |
|
135 (5) 135 (9) |
Corporate Social Responsibility |
A new proviso is inserted to Sec 135(5) to allow companies, which have spent CSR contribution in excess of the requirement. Now companies can set off such excess amounts in the succeeding fiscal years. Newly inserted to provide that constitution of CSR Committee shall not be applicable, in case the amount required to be spent u/s 135 (5) of the Act does not exceed Rs. 50 lakhs. Sub-sections (6) relating to unspent amount,(7) and (8) of Section 135 have not been notified yet. |
|
149(9) |
Independent Directors |
New proviso inserted to provide that an independent director may receive remuneration, exclusive of any fees payable u/s 197(5), in accordance with Schedule V of the Act if a company has no profits or inadequate profits. |
|
197 (3) |
Overall Maximum Managerial Remuneration |
Payment of remuneration in accordance with Schedule V of the Act to any non-executive director, including independent director, if a company fails to make profits or makes inadequate profits in a financial year. |
|
378 A- 378 ZU |
Producer Companies |
Chapter 21A inserted relating to Producer Companies on similar lines as provided in the Companies Act, 1956. |
|
393A |
Exemptions under Chp 22 |
A news section has been inserted empowering Central Govt to exempt any class of foreign companies or companies incorporated or to be incorporated outside India from any of the provisions of this Chapter |
|
403 (1) |
Fee for Filing |
It is proposed to relax provision of sec 403(1) of the Act which provides that if there is a default on two or more occasions in submitting, filing, registering, or recording of prescribed documents the same shall be done on payment of such higher additional fee as may be provided by rules. |
|
410 |
Constitution of NCLAT |
Removal of the restriction provided on the number of Judicial and Technical members that the Central Government may appoint in the Appellate Tribunal |
|
418A |
Benches of NCLAT |
Newly inserted section 418A to provide for the constitution of Benches of the Appellate Tribunal and related provisions. |
|
446 B |
Lesser penalties for certain Co. |
Benefit extended to a start-up company and Producer Company which is presently available to small companies and one-person companies |
|
Sec 452 |
Punishment for wrongful withholding of property |
Proviso inserted stating that the imprisonment of such officer or employee, shall not be ordered for wrongful possession or withholding of a dwelling unit, if the court is satisfied that the company has not paid to that officer or employee, any amount relating to provident fund, pension fund, gratuity fund or any other fund for the welfare of its officers or employees, maintained by the company; or compensation or liability for compensation under the Workmen'sCompensation Act, 1923 in respect of death or disablement.". |
|
454 (3) |
Adjudication of Penalties |
New proviso inserted to provide that no monetary penalty shall be imposed when such default relates to non-compliance of section 92(4) [relating to filing of Annual Return] and section 137(1) & (2) [relating to filing of Financial Statements] and has been rectified either prior to, or within thirty days of, the issue of the notice by the adjudicating officer. |
The author can also be reached at csamisheth@gmail.com
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