The Companies Act 2013 was amended and passed on 31st July, 2019 as Act No. 22 of 2019. The following are the major amendments made to Companies Act 2013.
Issuance of dematerialised shares
Dematerialisation of Shares is application to all Companies.
Re-categorisation of certain Offences
The Act re-categorized 16 of these offences as civil defaults, where adjudicating officers (appointed by the central government) may now levy penalties instead. These offences include:
(i) issuance of shares at a discount, and
(ii) failure to file annual return. Further, the Bill amends the penalties for some other offences.
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.
The Act amended 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.
Commencement of business
The Act states that a company may not commence business, unless it (i) 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, and (ii) files a verification of its registered address with the RoC within
30 days of incorporation. If it fails to comply with these provisions and is
found not to be carrying out business, its name of the company may be removed
from the Register of Companies.
Registration of charges
Deadline for Registration of Charge deadline made as 60 days (extendable by
Change in approving authority: Under the Act, change in period of financial year for a company associated with a foreign company, has to be approved by the National Company Law Tribunal. Similarly, any alteration in the incorporation document of a public company which has the effect of converting it to a private company, has to be approved by the Tribunal. Under the Bill, these powers have been transferred to central government.
Under the Act, a regional director can compound (settle) offences with a
penalty of up to five lakh rupees. The Act increased this ceiling to Rs 25 lakh.
Bar on holding 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. If the NCLT
passes an order against the officer, he will not be eligible to hold office in
any company for five years.
As per the amended Act, beneficial interest of a person who 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.