The Companies (Amendment) Act, 2019

companiesact.in/Companies-Act-2013/News-Details/20812/The Companies (Amendment) Act, 2019

The Companies (Amendment) Act, 2019

Aug 01, 2019

In order to review the existing provisions of the Companies Act, 2013 dealing with
the offences and to make recommendations to promote better corporate
compliance, the Government of India constituted a Committee in July, 2018 and
the said Committee, after taking the views of several stakeholders, submitted its
Report in August, 2018. Accordingly, it was proposed to amend certain provisions
of the Companies Act, 2013. However, in view of the urgency, the Companies
(Amendment) Ordinance, 2018 was promulgated on 2nd November, 2018. To
replace the aforesaid Ordinance, a Bill, namely, the Companies (Amendment)
Bill, 2018 was introduced in the Lok Sabha and passed in the said House on the
4th January, 2019. However, the said Bill could not be taken up for consideration
in the Rajya Sabha.

In order to give continued effect to the Companies (Amendment) Ordinance,

2018, the President promulgated the Companies (Amendment) Ordinance, 2019
and the Companies (Amendment) Second Ordinance, 2019 on 12th January,
2019 and 21st February, 2019 respectively.

The Companies (Amendment) Act, 2019 has now been enacted to replace the
Companies (Amendment) Second Ordinance, 2019 with certain additional
amendments which are considered necessary to ensure more accountability and
better enforcement to strengthen the corporate governance norms and
compliance management in corporate sector.

The Companies (Amendment) Act, 2019

1. Passed by the Lok Sabha 26th July, 2019

2. Passed by the Rajya Sabha 30th July, 2019

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 3. Assent given by the President of 31st July, 2019
India

Highlights of the Companies (Amendment) Act, 2019

(A) List of additional amendments: These amendments shall come into

force from date(s) as may be notified by the Central Government in Official
Gazette.

Section No. Corresponding Amendments

of the section of the
Amendment Companies
Act Act, 2013

Section 6 Section 26- The requirement of registration of

Matters to be prospectus has been substituted with the
stated in requirement of filing of prospectus with
prospectus the Registrar.

Section 7 Section 29- With the omission of the word “public” the
Public offer of scope of the section has been enlarged to
securities to include private companies in its ambit. The
be in Central Government can thus prescribe any
dematerialised class of unlisted companies including private
form companies for issuance, holding or
transferring of securities in dematerialised
form.

Section 8 Section 35- The section now provides that the copy of
Civil liability the prospectus shall be filed with the
for mis- Registrar instead of delivery for
statements in registration.
prospectus

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Section 14 Section 90- The company is now required to take
Register of necessary steps to identify an
significant individual who is a significant beneficial
beneficial owner. Failure to take necessary steps
owners in a shall be punishable.
company A new sub-section (9A) has been
inserted to provide the power to the
Central Government to make rules for
the purposes of this section.
The provision with respect to
punishment with imprisonment
originally included in the Ordinance has
been omitted in the Amendment Act.
If no person files an application before
NCLT for lifting of the restrictions on
the exercise of rights attached to the
shares within a period of one year,
such shares shall be transferred to IEPF
without any restrictions. (w.e.f.
02/11/2018)

Section 20 Section 132- NFRA can now perform its functions

Constitution of through such divisions as may be
National prescribed by the Central Government.
Financial Further there shall be an executive
Reporting body of NFRA consisting of the
Authority Chairperson and full-time Members for
efficient discharge of its certain
functions.
Sub-clause (B) of clause (c) of sub-
section (4) of section 132 has been
amended with respect to the extent of
debarring of the member or firm by
NFRA in case professional or other
misconduct is proved.

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Section 21 Section 135- The section now provides, inter alia for:
Corporate carrying forward the unspent CSR
Social amounts, to a special account to be
Responsibility spent within three financial years and
transfer thereafter to the Fund
specified in Schedule VII, in case of an
ongoing project; and
transferring the unspent amounts to
the Fund specified under Schedule VII,
in other cases.
In case of contraventions, the company
shall be punishable with fine which
shall not be less than Rs. 50,000 but
which may extend to Rs. 25 lakh and
every officer of such company who is in
default shall be punishable with
imprisonment for a term which may
extend to 3 years or with fine which
shall not be less than Rs. 50,000 but
which may extend to Rs. 5 lakh, or with
both.
Further the Central Government may
give such general or special directions
to a company or class of companies as
it considers necessary to ensure
compliance of provisions of this section
and such company or class of
companies shall comply with such
directions.

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Section 31 Section 212- Any officer not below the rank of
Investigation Assistant Director of Serious Fraud
into affairs of Investigation Office (SFIO), if so
Company by authorised, may arrest any person in
Serious Fraud accordance with the provisions of this
Investigation section.
Office The person so arrested may be taken
to a Special Court or Judicial Magistrate
or Metropolitan Magistrate within 24
hours of his arrest.
Where an investigation report
submitted by SFIO states that a fraud
has taken place and any director, KMP
or officer has taken undue advantage
or benefit, then the Central
Government may file an application
before the Tribunal with regard to
orders for disgorgement of asset,
property or money in respect of which
undue advantage was taken, and such
director, KMP or officer may be held
personally liable without any limitation
of liability.

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Section 33 Section 241- The Central Government may prescribe
Application to such company or class of companies in
Tribunal for respect of which, applications under
relief in cases sub-section (2), shall be made before
of oppression, the Principal Bench of NCLT and shall
etc. be dealt with by such Bench.
Where in the opinions of the Central
Government, there exist
circumstances, the Central
Government may refer the matter to
the Tribunal and request to the
Tribunal to inquire into the case and
record a decision about whether the
person is a fit and proper person to
hold the office of director or any other
office connected with the conduct and
management of any company.

Section 34 Section 242- At the conclusion of hearing of the case in

Powers of respect of section 241, the Tribunal shall
Tribunal record its decision stating specifically as to
whether or not the respondent is a fit and
proper person to hold the office of director
or any other office connected with the
conduct and management of any company.

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 Section 35 Section 243- The person who is not a fit and
Consequence proper person pursuant to section 242
of termination shall not hold the office of a director
or or any other office connected with the
modification conduct and management of the
of certain affairs of any company for a period of
agreements five years from the date of the decision
of the Tribunal.
The Central Government may, with the
leave of the Tribunal, permit such
person to hold any such office before
the expiry of the said period of five
years.
Further the person so removed from
the office of a director or any other
office connected with the conduct and
management of the affairs of the
company shall not be entitled to, or be
paid, any compensation for the loss or
termination of office.

Section 37 Section 272- The Registrar may present a petition of

Power of Court winding up on the ground that it is just and
to stay or equitable to do so under clause (e) of section
restrain 271.
proceedings

Section 38 Section 398- The word ‘prospectus’ in clause (f) of sub-

Provisions section (1) of section 398 has been omitted
relating to as prospectus is not required to be
filing of registered by the Registrar.
applications,
documents,
inspection,
etc., in
electronic
form

List of amendments through earlier Ordinance: These amendments shall be

deemed to have come into force from 02/11/2018.

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 Corresponding Amendments
Section No. section of the
of the Companies Act,
Amendment 2013
Act

Declogging the NCLT

Section 2 Section 2(41)- The power to dispose the application

Definition of for change of financial year and to
‘Financial year’ pass suitable orders thereon has
been vested with the Central
Government, which may delegate the
same to any other authority; Earlier
the said power was with NCLT
Further, any application pending
before NCLT as on 02nd November,
2018, shall be disposed of by NCLT in
accordance with the provisions
applicable to it before 02nd
November, 2018.

Section 5 Section 14- The power to approve the conversion

Alteration of of public company into a private
articles company has been vested with the
Central Government, which may
delegate the same to any other
authority; Earlier the said power was
with NCLT.
Further, any application pending
before NCLT as on 02nd November,
2018, shall be disposed of by NCLT in
accordance with the provisions
applicable to it before 02nd
November, 2018.

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Section 39 Section 441- The pecuniary jurisdiction of RD for
Compounding of compounding of offences has been
certain offences enhanced to Rs 25 lakhs from Rs 5
lakhs, which will reduce the number
of compounding applications filed
with NCLT;
Section 441(6)(a), which requires the
permission of the Special Court for
compounding of offences, has been
omitted. RD and NCLT, as the case
may be, can compound offence
which is punishable with
imprisonment or fine or both, or with
fine or imprisonment.

Related to Corporate Compliance

Section 3 Section 10A- Re-introduction of

Commencement Commencement of Business: A
of business, etc. company incorporated after 02nd
(new section) November, 2018 and having a share
capital shall not commence any
business or exercise any borrowing
powers unless:
a declaration is filed by a director
within a period of 180 days of the
date of incorporation of the
company, with RoC that every
subscriber to MOA has paid the value
of the shares agreed to be taken by
him on the date of making of such
declaration; and
the company has filed with RoC,
verification of its registered office as
provided in section 12.

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 Penal Provision: If default is made in
complying with the requirements of
this section, the company shall be
liable to a penalty of Rs 50,000 and
every officer who is in default shall
be liable to a penalty of Rs 1,000 for
each day during which such default
continues but not exceeding Rs. one
lakh;
Removal of name of company:
Where no declaration has been filed
with RoC within 180 days of the date
of incorporation of the company and
RoC has reasonable cause to believe
that the company is not carrying on
any business or operations, he may,
initiate action for the removal of the
name of the company from the
register of companies under section
Section 4 Section 12- RoC may
248.cause a physical verification of
Registered office the registered office of the company and
of company where the RoC has reason to believe that
the Company is not carrying into business/
operation after physical verification, he
may initiate action to strike off the name
of the Company.

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Section 11 Section 77- Duty The period of 300 days for creation
to register and modification of charge has been
charges, etc. reduced to 60 days, i.e. 30 days of
normal filing period and 30 days with
additional fees.
RoC may, on an application, allow
such registration to be made within a
further period of 60 days after
payment of such advalorem fees as
may be prescribed.

Note: After 120 days, creation/

modification of charge shall not be
registered.

Charges created before 02nd

November, 2018, can be registered
within 6 months from 02nd
November, 2018.

Section 26 Section 164- New ground of disqualification and

Disqualifications vacation of office of director has been
for appointment added:
of director If a person has not complied with the
number of directorship u/s 165(1) i.e.
maximum number of directorship.

Re-categorising of offences from compoundable offences to an in-house

adjudication framework

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Section 9 Section 53-
Prohibition on Old Penal New Penal Provision
issue of shares Provision
at discount

Company: Company and Officer

Fine: Rs 1 in default shall be liable
lakh to Rs 5 to a penalty which may
lakhs; and extend to an amount
Officer in equal to the amount
default: raised through the issue
Imprisonment: of shares at a discount
Upto 6 or Rs 5 lakhs, whichever
months; or is less and the company
Fine: Rs 1 shall also be liable to
lakh to Rs 5 refund all monies
lakhs; or received with interest @
with both 12% per annum from
the date of issue of such
shares to the persons to
whom such shares have
been issued.

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Section 10 Section 64-
Notice to be Old Penal New Penal Provision
given to Provision
Registrar for
alteration of
share capital Company and Company and Officer
Officer in in default shall be
default: liable to a penalty of
Fine: Upto Rs Rs 1,000 for each day
1,000 for each during which such
day during default continues, or Rs
which such 5 lakhs, whichever is
default less.
continues, or
Rs 5 lakhs,
whichever is
less

Section 15 Section 92-

Annual return Old Penal New Penal Provision
Provision

Company: Company and Officer

Fine: Rs in default shall be liable
50,000 to Rs to a penalty of Rs
5 lakhs; and 50,000 and in case of
Officer in continuing failure, with
default: further penalty of Rs
Imprisonment: 100 for each day during
Upto 6 such failure continues,
months; or subject to a maximum
Fine: Rs of Rs 5 lakhs.
50,000 to Rs
5 lakhs; or
with both

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Section 16 Section 102-
Statement to be Old Penal New Penal Provision
annexed to Provision
notice

Every Every promoter,

promoter, director, manager or
director, other KMP who is in
manager or default shall be liable
other KMP to a penalty of Rs
who is in 50,000 or five times the
default: amount of benefit
Fine:Upto Rs accruing to the
50,000 or five promoter, director,
times the manager or other KMP
amount of or any of his relatives,
benefit whichever is higher.
accruing to
the promoter,
director,
manager or
other KMP or
any of his
relatives,
whichever is
more.

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Section 17 Section 105-
Proxies Old Penal New Penal Provision
Provision

Officer Officer who is in default

who is in shall be liable to a penalty
default: of Rs 5,000.
Fine: Upto
Rs 5,000.

Section 18 Section 117-

Resolutions and Old Penal New Penal Provision
agreements to Provision
be filed

Company: Company shall be liable to

Fine: Rs 1 a penalty of Rs 1 lakh and
lakh to Rs in case of continuing
25 lakhs; failure, with further
and penalty of Rs 500 for each
Officer in day after the first during
default which such failure
including continues, subject to a
liquidator: maximum of Rs 25 lakhs;
Fine: Rs and
50,000 to Officer who is in default
Rs 5 lakhs including liquidator shall
be liable to a penalty of Rs
50,000 and in case of
continuing failure, with
further penalty of Rs 500
for each day after the first
during which such failure
continues, subject to a
maximum of Rs 5 lakhs.

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Section 19 Section 121-
Report on Old Penal New Penal Provision
annual general Provision
meeting

Company: Company shall be liable to

Fine:Rs 1 a penalty of Rs one lakh
lakh to Rs and in case of continuing
25 lakhs; failure, with further
and penalty of Rs 500 for each
Officer in day after the first during
default: which such failure
Fine: Rs continues, subject to a
25,000 to maximum of Rs 5 lakhs;
Rs one and
lakh. Officer who is in default
shall be liable to a penalty
which shall not be less than
Rs 25,000 and in case of
continuing failure, with
further penalty of Rs 500
for each day after the first
during which such failure
continues, subject to a
maximum of Rs one lakh.

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Section 22 Section 137-
Copy of financial Old Penal New Penal Provision
statement to be Provision
filed with
Registrar
Company: Company shall be liable
Fine: Rs 1,000 to a penalty of Rs 1,000
for every day for every day during
during which which the failure
the failure continues but which
continues but shall not be more than
which shall Rs 10 lakhs; and
not be more MD and CFO or any
than Rs 10 other director who is
lakhs; and in default shall be
MD and CFO liable to a penalty of Rs
or any other 100 for each day after
director who the first during which
is in default: such failure continues,
Imprisonment: subject to a maximum
Upto 6 of Rs 5 lakhs
months; or
Fine: Rs 1
lakh to Rs 5
lakhs; or
with both

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Section 23 Section 140-
Removal, Old Penal New Penal Provision
resignation of Provision
auditor and
giving of special
notice Auditor in Auditor in default shall
default: be liable to a penalty of
Fine: not less Rs 50,000 or an amount
than Rs equal to the
50,000 or the remuneration of the
remuneration auditor, whichever is
of the less, and in case of
auditor, continuing failure, with
which ever is further penalty of Rs
less but 500 for each day after
which may the first during which
extend to Rs such failure continues,
5 lakhs. subject to a maximum
of Rs 5 lakhs.

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Section 24 Section 157-
Company to Old Penal New Penal Provision
inform Director Provision
Identification
Number to
Registrar Company: Company shall be liable to
Fine: Rs a penalty of Rs 25,000 and
25,000 to in case of continuing
Rs one failure, with further
lakh; and penalty of Rs 100 for each
Officer in day after the first during
default: which such failure
Fine: Rs continues, subject to a
25,000 to maximum of Rs one lakh;
Rs one and
lakh. Officer who is in default
shall be liable to a penalty
of not less than Rs 25,000
and in case of continuing
failure, with further
penalty of Rs 1,000 for
each day after the first
during which such failure
continues, subject to a
maximum of Rs one lakh.

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Section 25 Section 159-
Penalty for Old Penal New Penal
default of Provision Provision
certain
provisions
Person in Person in default
default: shall be liable to a
Imprisonment: penalty which may
Upto 6 months; extend to Rs 50,000
or and where the
Fine: Upto Rs default is a
50,000 and continuing one, with
where the a further penalty
contravention is which may extend to
a continuing Rs 500 for each day
one, with a after the first during
further fine which such default
which may continues.
extend to Rs
5,000 for every
day after the
first during
which the
contravention
continues.

Section 27 Section 165-

Number of Old Penal New Penal Provision
directorships Provision

Person in Person in default

default: shall be liable to a
Fine: Rs 5,000 penalty of Rs 5,000
to Rs 25,000 for for each day after the
every day after first during which the
the first during contravention
which the continues.
contravention
continues.

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Section 28 Section 191-
Payment to Old Penal New Penal Provision
director for loss Provision
of office, etc., in
connection with
transfer of Director in Director in default shall
undertaking, default: be liable to a penalty of
property or Fine: Rs Rs one lakh.
shares 25,000 to
Rs one
lakh.

Section 29 Section 197-

Overall Old New Penal Provision
maximum Penal
managerial Provision
remuneration
and managerial
remuneration in
case of absence Person in Person in default shall be
or inadequacy of
default: liable to a penalty of Rs one
profits Fine: Rs lakh and where any default
one lakh has been made by a
to Rs 5 company, the company
lakhs. shall be liable to a penalty
of Rs 5 lakhs.

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Section 30 Section 203-
Appointment of Old Penal New Penal Provision
key managerial Provision
personnel

Company: Company shall be

Fine: Rs 1 lakh liable to a penalty Rs
to Rs 5 lakhs; 5 lakhs; and
and Every director and
Officer in KMP who is in
default: default shall be liable
Fine: Upto Rs to a penalty of Rs
50,000 and 50,000 and where the
where the default is a continuing
contravention one, with a further
is a continuing penalty of Rs 1,000
one, with a for every day after the
further fine first during which such
which may default continues but
extend to Rs not exceeding Rs 5
1,000 for every lakhs.
day after the
first during the
contravention
continues.

Section 32 Section 238-

Registration of Old Penal New Penal Provision
offer of schemes Provision
involving
transfer of
shares Director in Director in default shall
default: beliable to a penalty of
Fine: Rs Rs one lakh.
25,000 to Rs
five lakhs.

Adjudication of Penalties

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Section 42 Section 454- Now, apart from levying penalty in case of
Adjudication of default, the Adjudicating officer has also
penalties been empowered to direct rectification of
the default.

Section 43 Section 454A- A new section 454A has been inserted to

Penalty for provide that where a penalty in relation to
repeated default a default has been imposed on a person
(new section) under the Act, and the person commits
the same default within a period of 3 years
from the date of order imposing such
penalty, it or he shall be liable for the
second and every subsequent defaults for
an amount equal to twice the amount
provided for such default under the
relevant provision of the Act.

Others

Section 12 Section 86- New sub-section (2) has been added:

Punishment for If any person wilfully furnishes any false or
contravention incorrect information or knowingly
suppresses any material information,
required to be registered in accordance
with the provisions of section 77
(Registration of Charge), he shall be liable
for action under section 447.

Section 13 Section 87- Due to amendments in the provision of

Rectification by section 77, the power of the Central
Central Government to condone delay in respect
Government in of registration/modification of charge has
register of been omitted.
charges

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Section 36 Section 248- Due to insertion of section 10A and
Power of amendment in section 12, the following
Registrar to two new grounds have been added for
remove name of removal of name of companies from the
company from register of companies:
register of
companies the subscribers to the memorandum
have not paid the subscription which
they had undertaken to pay at the
time of incorporation of a company
and a declaration to this effect has
not been filed within 180 days of its
incorporation under section 10A(1);
or
the company is not carrying on any
business or operations, as revealed
after the physical verification carried
out under section 12(9).

Section 40 Section 446B- Due to amendments in the penal

Lesser penalties provisions of sections 92, 117 and 137, the
for One Person word ‘fine’ has been substituted with
Companies or ‘penalty’.
small companies

Section 41 Section 447- The maximum fine has been increased

Punishment for from Rs 20 lakhs to Rs 50 lakhs
fraud

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