The Companies (Amendment) Act, 2020

Introduced in the Lok Sabha

17th March, 2020

Passed by the Lok Sabha

19th September, 2020

Passed by the Rajya Sabha

22nd September, 2020

Assent given by the President of India

28th September, 2020

Section no. of the Companies (Amendment) Act, 2020

Corresponding section of the Companies Act, 2013

Amendments

Amendments related to ‘Ease of living for corporates’

Section 2

Section 2(52)- Definition of ‘listed company’

The Central Government has been empowered to exclude certain companies, based on listing of certain securities on recognized stock exchanges, as may be provided by rules, in consultation with SEBI from the definition of listed companies.

Thus, companies which list only debt securities (NCDs) may be excluded from the definition of listed company for the purposes of the Companies Act.

Section 5

Section 23- Public offer and private placement

• A class of public companies will be allowed to list certain class of securities on stock exchanges in permissible foreign jurisdictions or such other jurisdictions, as may be provided by rules.
• The Central Government has been empowered to exempt, by notification, any class or classes of public companies referred to above from any of the provisions of Chapter III (Prospectus and Allotment of Securities), Chapter IV (Share Capital and Debentures), section 89 (Declaration in respect of beneficial interest in any share), section 90 (Register of significant beneficial owners in a company) or section 127 (Punishment for failure to distribute dividends) of the Act.

Amendments related to ‘Ease of Compliances’

Section 4

Section 16- Rectification of name of company

• The time limit of compliance of direction given by the Central Government to change the name of company has been reduced from 6 months to 3 months. 
• Further, the Central Government has been empowered to allot a new name to the company, in case of default in complying with its direction instead of imposing punishment for non-compliance for such default. The company is however not prevented from subsequently changing its name.

Section 11

Section 62- Further issue of share capital

The Central Government is empowered to prescribe days lesser than 15, for deeming decline of offer of rights issue.

This will reduce the timelines for applying for rights issues.

Section 18

Section 89- Declaration in respect of beneficial interest in any share

New sub-section (11) has been inserted to enable the Central Government to notify a class or classes of persons who shall, unconditionally or subject to such conditions as may be specified, be exempted from complying with section 89 [except sub-section (10)].

Section 22

Section 117- Resolutions and agreements to be filed

The Central Government is empowered to exempt any class of NBFCs and any class of HFCs from filing of resolutions passed to grant loans or give guarantees or to provide security in respect of loans in the ordinary course of their business.

Earlier, only Banking Companies were exempted.

Section 27

Section 135- Corporate Social Responsibility

• Now, the companies, which spend an amount in excess of the requirement of 2%, will be allowed to set off such excess amount out of their obligation in the succeeding financial years after complying with the prescribed rules.
• New sub-section (9) has been inserted to provide that the requirement of constitution of CSR Committee shall not be applicable, in case the amount required to be spent on CSR does not exceed Rs. 50 lakhs and the functions of CSR Committee in such a case, may be discharged by the Board of directors.

Amendments related to further strengthen the ‘Corporate Governance’

Section 25

Section 129A- Periodical financial results

A new section 129A has been inserted to empower the Central Government to provide by rules such class or classes of unlisted companies to prepare periodical financial results of the company, audit or limited review thereof and their filing with Registrar within 30 days from the end of that period as specified in the rules.

Section 32

Section 40

Section 149- Company to have Board of Directors

Section 197- Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits

Now, a non-executive director including an independent director, may receive remuneration, if a company has no profits or inadequate profits in accordance with Schedule V of the Act.

Companies will now be able to pay remuneration to Non-Executive Directors and Independent Directors in case of loss or inadequate profits under Schedule V as applicable to Executive Directors earlier.

Amendments related to ‘Winding Up’

Section 46

Section 284- Promoters, directors, etc., to cooperate with Company Liquidator

• It provides that when a person required to assist a Company Liquidator does not do so, then the Company Liquidator may make an application to NCLT for necessary directions.
• Further, it provides that NCLT may direct such person to comply with the directions of the Company Liquidator and to cooperate with him in discharging his functions and duties.

Section 47

Section 302- Dissolution of company by Tribunal

Sub-section (3) has been substituted to provide that NCLT 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.

Section 50

Section 348- Company Liquidator to deposit monies into scheduled bank

Sub-section (6) has been substituted 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 deemed to be a contravention of the IBC, 2016 and the rules and regulations made thereunder.

Section 51

Section 356- Powers of Tribunal to declare dissolution of company void

Sub-section (2) has been substituted to provide that NCLT 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 thirty days of the order.

Amendments related to ‘Foreign Companies’

Section 53

Section 379- Application of Act to foreign companies

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 Order published in Official Gazette has been omitted since a new provision has been inserted to provide the Central Government with power related to granting exemption to foreign companies.

Section 55

Section 393A- Exemptions under this Chapter

A new section 393A has been inserted in the Act 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.

Reduction in amount of monetary Penalty

Section 12

Section 64- Notice to be given to Registrar for alteration of share capital

Offence: In case a company fails to file notice of alteration or increase or redemption of share capital along with an altered memorandum with the Registrar within 30 days.

Changes:

• The amount of penalty on company and every officer who is in default has been reduced from Rs. 1,000 to Rs. 500 for each day during which default continues.
• Further, the maximum amount of penalty has been reduced from Rs. 5 lakh to Rs. 1 lakh.

Section 20

Section 92- Annual return

Offence: In case a company fails to file its annual return within specified period (i.e. 60 days from AGM).

Changes:

• The amount of penalty on company and every officer who is in default has been reduced from Rs. 50 thousand to Rs. 10 thousand.
• Further, the maximum amount of penalty has been reduced from Rs. 5 lakh to Rs. 2 lakh in case of a company and Rs. 50 thousand in case of an officer who is in default.

Section 22

Section 117- Resolutions and agreements to be filed

Offence: In case any company fails to file the resolution or the agreement with the Registrar within specified time (i.e. 30 days from the date of passing the resolution).

Changes:

• The amount of penalty on company has been reduced from Rs. 1 lakh to Rs. 10 thousand & in case of continuing failure, each day penalty has been reduced from Rs. 500 to Rs. 100 and the maximum amount of penalty has been reduced from Rs. 25 lakh to Rs. 2 lakh.
• The amount of penalty on officer who is in default has been reduced from Rs. 50 thousand to Rs. 10 thousand & in case of continuing failure, each day penalty has been reduced from Rs. 500 to Rs. 100 and the maximum amount of penalty has been reduced from Rs. 5 lakh to Rs. 50 thousand.

Section 28

Section 137- Copy of financial statement to be filed with Registrar

Offence: In case a company fails to file the copy of the financial statements with the Registrar within the time specified therein (i.e. within 30 days from the date of AGM).

Changes:

• The amount of penalty on company has been reduced from Rs. 1,000 to Rs. 100 for each day during which the failure continues and maximum amount of penalty has been reduced from Rs. 10 lakh to Rs. 2 lakh.
• The amount of penalty on MD/ CFO/ directors has been reduced from Rs. 1 lakh to Rs. 10 thousand and maximum amount of penalty has been reduced from Rs. 5 lakh to Rs. 50 thousand.

Section 29

Section 140- Copy of financial statement to be filed with Registrar

Offence: In case the auditor fails to file his resignation with the Registrar within the time specified therein (i.e. 30 days from the date of resignation).

Changes:

The maximum amount of penalty on auditor has been reduced from Rs. 5 lakh to Rs. 2 lakh.

Section 33

Section 165- Number of directorships

Offence: In case a person holds office as a director in more than the limit specified therein.

Changes:

The amount of penalty on such person has been reduced from Rs. 5,000 to Rs. 2,000 for each day after the first during which such violation continues and maximum amount of penalty restricted to Rs. 2 lakh.

Omitting punishment with imprisonment

Section 3

Section 8- Formation of companies with charitable objects, etc.

Default in complying with the requirements relating to formation of companies with charitable objects, etc.

Section 6

Section 26- Matters to be stated in prospectus

Contravention of provisions relating to issue of a prospectus.

Section 7

Section 40- Securities to be dealt with in stock exchanges

Default in complying with the provisions of this section relation to securities to be dealt with in stock exchanges.

Section 14

Section 68- Power of company to purchase its own securities

If a company makes any default in complying with the provisions of this section or any regulation made by SEBI.

Section 24

Section 128- Books of account, etc., to be kept by company

If MD, WTD in charge of finance, CFO or any other person of a company charged by the Board with the duty of complying with the provisions of this section, contravenes the provisions of the section.

Section 31

Section 147- Punishment for contravention

If any of the provisions of sections 139 to 146 (both inclusive) (Audit and Auditors) is contravened.

Section 34

Section 167- Vacation of office of director

If a person, functions as a director even when he knows that the office of director held by him has become vacant on account of any of the disqualifications specified in this section.

Section 43

Section 242- Powers of Tribunal

Contravention of the order of NCLT relating to alterations in MOA or AOA.

Section 44

Section 243- Consequences of termination or modification of certain agreements

Any person or director of the company who knowingly acts as a managing director or other director or manager of a company in contravention of clause (b) of sub-section (1) or sub-section (1A) of this section.

Section 49

Section 347- Disposal of books and papers of company

If any person acts in contravention of any rule framed or an order made under sub-section (3) of this section.

Section 54

Section 392- Punishment for contravention

If a foreign company contravenes the provisions of Chapter XXII relating to ‘Companies Incorporated outside India’.

Section 61

Section 441- Compounding of certain offences

If any officer or other employee of the company who fails to comply with any order made by NCLT or RD under this section.

Penal provisions removed

Section 4

Section 16– Rectification of name of company

Default in complying with any direction of the Central Government for rectification of name of company.

Section 8

Section 48- Variation of shareholders’ rights

Default in complying with the provisions relating to variation of shareholders’ rights.

Section 10

Section 59- Rectification of register of members

Default in complying with the order of NCLT relating to rectification of register of members.

Section 13

Section 66- Reduction of share capital

If a company fails to publish the confirmation order of the reduction of share capital by the Tribunal.

Section 15

Section 71- Debentures

Default in complying with the order of Tribunal relating to redemption of debentures.

Section 46

Section 284- Promoters, directors, etc., to cooperate with Company Liquidator

Where any person, without reasonable cause, fails to cooperate with the company liquidator under this section.

Section 47

Section 302- Dissolution of company by Tribunal

If the Company Liquidator makes a default in forwarding a copy of the order to the Registrar within the period specified therein.

Section 48

Section 342- Prosecution of delinquent officers and members of company

If a person fails or neglects to give assistance required under this section.

Section 50

Section 348- Company Liquidator to deposit monies into scheduled bank

If a Company Liquidator contravenes the provisions of this section.

If a Company Liquidator makes wilful default in filing the statement referred to in sub-section (1) of this section.

Section 51

Section 356- Powers of Tribunal to declare dissolution of company void

If the Company Liquidator or the person fails to file the certified copy of the order with the Registrar under this section.

Re-categorizing of offences from compoundable offences to in-house adjudication framework

Section 9

Section 56- Transfer and transmission of securities

Where any default is made in complying with the provisions of this section.

Section 16

Section 86- Punishment for contravention

If any company contravenes any provision of Chapter VI relating to Registration of Charges.

Section 17

Section 88- Register of members, etc.

If a company does not maintain a register of members or debenture-holders or other security holders or fails to maintain them in accordance with the provisions of this section.

Section 18

Section 89- Declaration in respect of beneficial interest in any share

If any person fails, to make a declaration as required under this section.

If a company, required to file a return under this section, fails to do so before the expiry of the time specified.

Section 19

Section 90- Register of significant beneficial owners in a company

If any person fails to make a declaration of SBO as required under this section.

If a company, required to maintain register or file the information or required to take necessary steps under this section, fails to do so or denies inspection as provided therein.

Section 20

Section 92- Annual return

If a company secretary in practice certifies the annual return otherwise than in conformity with the requirements of this section or the rules made thereunder.

Section 21

Section 105- Proxies

If for the purpose of any meeting of a company, invitations to appoint as proxy a person or one of a number of persons specified in the invitations are issued at the company’s expense to any member entitled to have a notice of the meeting sent to him and to vote thereat by proxy.

Section 23

Section 124- Unpaid Dividend Account

If a company fails to comply with any of the requirements of this section.

Section 26

Section 134- Financial statement, Board’s report, etc.

If a company fails to comply with the provisions regarding signing of financial statement and contents & signing of Board’s Report.

Section 27

Section 135- Corporate Social Responsibility

If a company fails to spend CSR amount or transfer such amount to a fund specified in Schedule VII or the Unspent CSR Account, as the case may be.

Section 30

Section 143- Powers and duties of auditors and auditing standards

If any auditor, cost accountant or company secretary in practice does not comply with the provisions regarding reporting of fraud.

Section 35

Section 172- Punishment

If a company contravenes any of the provisions of Chapter XI and for which no specific punishment is provided therein.

Section 36

Section 178- Nomination and Remuneration Committee and Stakeholders Relationship Committee

In case of any contravention of the provisions of sections 177 and 178.

Section 37

Section 184- Disclosure of interest by director

If a director of the company does not disclose the nature of his interest under this section.

Section 38

Section 187- Investments of company to be held in its own name

If a company contravenes the provisions of this section.

Section 39

Section 188- Related party transactions

Any director or any other employee of a company, who had entered into or authorised the contract or arrangement in violation of the provisions of this section.

Section 41

Section 204- Secretarial audit for bigger companies

If a company or any officer of the company or the company secretary in practice, contravenes the provisions of this section.

Section 42

Section 232- Merger and amalgamation of companies

If a transferor company or a transferee company contravenes the provisions of this section.

Section 42

Section 247- Valuation of registered valuers

If a valuer contravenes the provisions of this section or the rules made thereunder.

Section 57

Section 405- Power of Central Government to direct companies to furnish information or statistics

If any company fails to comply with an order made under this section, or knowingly furnishes any information or statistics which is incorrect or incomplete in any material respect.

Section 63

Section 450- Punishment where no specific penalty or punishment is provided

If a company or any officer of a company or any other person contravenes any of the provisions of this Act or the rules made thereunder, or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction or exemption in relation to any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere in this Act.

Amendments relating to Adjudication, Compounding etc.

Section 31

Section 147- Punishment for contravention

The reference of section 143 mentioned in section 147 has been omitted as punishment for default of section 143 is already provided in section 143 itself.

Section 65

Section 454- Adjudication of penalties

A new proviso in sub-section (3) has been inserted to provide that no monetary penalty shall be imposed by the adjudicating officer, when the default relates to non-compliance of section 92(4) [Annual Return] or section 137(1) or (2) [Filing of Financial Statements] has been rectified either prior to, or within 30 days of, the issue of the notice by the adjudicating officer.

This is very important amendment. A window has been provided within which penalties shall not be levied for delay in filing annual return and financial statements in certain cases. It will reduce the chances of monetary penalty being levied where the default is made good within a defined time.

Section 60

Section 435- Establishment of Special Courts

It provides that the offence under section 452 i.e. punishment for wrongful withholding of property, will be excluded from the applicability of section 435 i.e. the Special Court.

Section 62

Section 446B- Lesser penalties for certain companies

Section 446B has been substituted to provide for payment of lessor 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.

Section 64

Section 452- Punishment for wrongful withholding of property

A proviso in sub-section (2) has been inserted to provide that the imprisonment of officer or employee of the company for wrongful withholding of property shall not be ordered by the Court if the court is satisfied that such officer or employee has not received certain statutory dues from the company.

Other Amendments

Section 52

Sections 378A to 378ZU- Producer Companies

A new Chapter as Chapter XXIA relating to Producer Companies has been inserted on similar lines as provided in the Companies Act, 1956.

Section 56

Section 403- Fee for filings, etc.

It empowers to the Central Government to prescribe  higher additional fees for default in submitting, filing, registering or recording of prescribed documents on two or more occasions.

Earlier it was provided that the minimum additional fees which may be levied shall not be less than twice the additional provided in rules.

Section 58

Section 410- Constitution of Appellate Tribunal

The restriction on the appointment of the number of judicial and technical members in the Appellate Tribunal by the Central Government has been removed.

Section 59

Section 418A- Benches of Appellate Tribunal

A new section 418A has been inserted to provide for constitution of additional Benches of NCLAT and related provisions.

Section 66

Section 465- Repeal of certain enactments and savings

After introduction of new chapter XXIA on ‘producer companies’, the first proviso to sub-section (1) has been omitted which provides that the provisions of Part IXA of the Companies Act, 1956 shall be applicable to a producer company.