The Companies Act (Amendment) Ordinance 2019 Highlights and Analysis

INTRODUCTION

A Committee under the chairmanship of Mr. Injeti Srinivas formed by the Ministry of the Company Affairs (“MCA”) gave their recommendations to relook the offences under the Companies Act, 2013 (“Act”). Consequently ,The Ministry of Law and Justice had came out with an Ordinance dated 2nd November, 2018, further amending 31 provisions of the Act. Ordinance will cease to operate on 21st January, 2019. Since the Bill to make amendments to the Companies Act, 2013, is pending in the Rajya Sabha, the ordinance has been re-promulgated.Hence,the Government of India has re-promulgated an ordinance to amend the companies law to further improve the ease of doing business as well as ensure better compliance levels.

Overall 29 sections are amended and 2 new sections have been added through the previous ordinances, which were promulgated on 2nd November, 2018 (Ordinance 9 of 2018) and on 12th January, 2019 (Ordinance 3 of 2019).

SOME OF THE MAJOR AMENDMENTS AND IMPACT ON THE CORPORATE SECTOR

  • In Section 2(41) of the Companies Act, the application for approving a change in financial year which was earlier to be made to “Tribunal”, now will be made to the “Central Government”.
  • Commencement of Business -The Ordinance will put restriction on every company (incorporated post commencement of the Ordinance), to not to commence its business or exercise borrowing powers unless the directors file a declaration within a period of 180 days from the date of incorporation to the effect that every subscriber to the memorandum has paid the cost of the shares and the registered office is confirmed by filing required returns with the Registrar. Noncompliance, may be an extra ground for Registrar to strike off of the name of the company.
  • Physical Verification- Registrar of Companies is now empowered vide a sub- section (9) to physically verify of the registered office on reasonable cause to believe that whether a business or operations is being carried out by the company. In case of any non- compliance of sub- section (1) in respect of having such an office in place is found, the same may also be an additional ground for Registrar to strike off of the name of the company.
  • Alteration of Articles- The application for Alteration of the Articles to give effect to conversion of a public company to a private company which was earlier made to the Tribunal, now needs to be sent the Central Government.
  • The creation of charges has to be registered within 30 days of creation which, on an application, may be extended by the Registrar to additional 30 days (existing provisions provided 270 days on payment of additional fee). In case of failure to register within the additional time of 30 days, the Registrar may, on an application, allow an additional period of 60 days from the date of application for which an ad valorem fee shall be levied.
  • Punishment of contravention -Apart from the existing penal provisions on any contravention of the provisions of the chapter, any wilful furnishing of false or incorrect information or knowingly suppression of any material information pertaining to registration of charges shall tantamount to be a fraud and shall attract action under Section 447.
  • 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, within 1 year.
  • Disqualifications of director –A new clause has been inserted under the Section linking Section 165, which shall be a ground for disqualification of a director, if he/ she breaches the limits of maximum directorship allowed there under. It is pertinent to note that falling under any of the clauses of Section 164 leads to automatic vacation of office that too, from all the existing companies. This is one of the significant provisions which need immediate attention.
  • The Ordinance has increased the limit of offence for compounding before the Regional Director from 5 Lakhs to 25 Lakhs.
  • The Power of the Adjudicating Authority has been expanded and the existing section empowered the adjudicating officer to impose penalty, by an order, on the company and the officer who is in default in case of any non- compliance or default of the provisions of the Act, however, such an order may henceforth be included any other person too, Further, the order of the adjudicating officer may also provide for rectification of the default by the concerned person. The penal provisions as provided in sub- section (8) shall apply to violation in compliance of the said order also.
  • Penalty for repeated default-This newly inserted section provides for penalty of twice the amount of penalty in case of repeated defaults(repeated within 3 years from the date of order imposing penalty for earlier default) by companies or any person who had already been subjected to penalty under the Act.

CHANGES IN THE PENAL PROVISIONS

The changes that have been brought in the penal provisions have been consolidated in the following table for ready reference:

As per the Current ordinance the following 16 out of 81 Compoundable Offences shall now be liable to penalty instead of being punishable with imprisonment.

Author: Mr. Shubham Borkar, Senior Associate – Litigation and Business Development  and Lakshay Kewalramani –Intern, at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at shubham@khuranaandkhurana.com or at www.linkedin.com/in/shubhamborkar.

Leave a Reply

Archives

  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • September 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010