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SUMMARY OF KEY AMENDMENTS IN THE COMPANIES ACT, 2013 (CA, 2013)

I. Roadmap of Companies (Amendment) Act, 2019:

The Union Cabinet approved the proposal to introduce Companies (Amendment) Bill,
2019 in the Parliament to amend CA 2013 on 17th July 2019

Companies (Amendment) Bill, 2019 placed before the Lok Sabha on the 25th July 2019
and passed on 26th July 2019

Companies (Amendment) Bill, 2019 passed by Rajya Sabha on 30th July 2019
e Companies (Amendment) Bill, 2019 in the Parliament to conduct amendments in CA

Companies (Amendment) Act, 2019 received the assent of President and published in
the Gazette of India on 31st July 2019

II. Executive Summary of the provisions of the Companies (Amendment) Act, 2019:

1. Re-categorisation / Decriminalisation of defaults / offences: The defaults/offences for which the fine, fine and imprisonment and fine and/or imprisonment was laid
down under CA, 2013 have now been replaced with Penalties. Below are the details of such defaults/offences:

Sr. Section Provision Penalties

No.
1 Section 53(3) Prohibition of issue of shares at a discount. In the case of contravention:
 Penalty on Company & Officer in default of the amount involved in share
issue or Rs.5 lakhs, whichever is less; and
 Company to refund all monies received with interest @12% p.a. from the
date of issue of shares.
2 Section 64(2) Notice to be given to Registrar for alteration of share In case of non-filing of notice of alteration of share capital with ROC in Form

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Sr. Section Provision Penalties
No.
capital. SH-7 within the prescribed period of 30 days:
 Penalty on Company & Officer in default of Rs.1000 per day till the time
such default continues, or Rs.5 lakhs whichever is less.
3 Section 86 Registration, Modification and Registration of Wilfully furnishing of any false or incorrect information or suppression of any
Charges material information will attract punishment for fraud as per section 447.
4 Section 92(5) Failure to file the Annual Return within 60 days from Penalty on Company & Officer in default of Rs.50,000 and Rs.100 per day till
the date of AGM the date of filing subject to maximum of Rs.5 lakhs.
5 Section 102(5) Failure to attach/circulate the explanatory statement Penalty on every promoter, director, manager or other KMP in default of
along with the notice of EGM/AGM Rs.50,000 or 5 times the amount of benefit accruing to the promoter,
director, manager or other KMP or any of his relatives, whichever is higher.
6 Section 105(3) Default in providing a declaration regarding Penalty on every officer in default of Rs.5,000.
appointment of proxy in the notice of EGM/AGM
7 Section 117(2) Failure/Delay in filing certain resolutions with ROC in  Penalty on the Company: Rs.1 lakh and Rs.500 per day till the date of
Form MGT-14 within 30 days from the date of passing filing subject to maximum of Rs.25 lakhs.
 Penalty on the Officer in default: Rs.50,000 and Rs.500 per day till the
date of filing subject to maximum of Rs.5 lakhs.
8 Section 121(3) Failure / Delay in filing Report on AGM by public listed  Penalty on the Company: Rs.1 lakh and Rs.500 per day till the date of
company with ROC in Form MGT-15 within 30 days filing subject to maximum of Rs.5 lakhs.
from the date of AGM  Penalty on the Officer in default: Rs.25,000 and Rs.500 per day till the
date of filing subject to maximum of Rs.1 lakh.
9 Section 137(3) Failure to file the copy of the financial statements  Penalty on the Company: Rs.1000 per day till the date of filing subject to
within 30 days from the date of AGM maximum of Rs.10 lakhs.
 Penalty on MD, Directors, CEO and CFO: Rs.1 lakh and Rs.100 per day
till the date of filing subject to maximum of Rs.5 lakhs.
10 Section 140(3) Failure/Delay in filing the resignation by Auditor in Penalty on the Auditor: Rs.50,000 or Audit Fees received, whichever is less
Form ADT-3 with ROC within 30 days from the date and further penalty of Rs.500 per day after the first during which such failure
of resignation. continues, subject to a maximum of five lakh rupees.”
11 Section 157(2) Failure/Delay by company in informing DIN of director  Penalty on the Company: Rs.25,000 and Rs.100 per day till the date of
to ROC in Form DIR-3C within 15 days from the date filing subject to maximum of Rs.1 lakh.
of receipt of DIN  Penalty on the Officer in default: Rs.25,000 and Rs.100 per day till the
date of filing subject to maximum of Rs.1 lakh.
12 Section 159 Non-compliance with Section 152 (Appointment of Penalty on the Individual or Director: Rs.50,000 and Rs.500 per day till the
directors), Section 155 (Prohibition to obtain more date of filing.
than one Director Identification Number) and Section

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Sr. Section Provision Penalties
No.
156 (Director to intimate Director Identification
Number)
13 Section 165(6) Accepting directorships beyond specified limits i.e. 20 Penalty on the Director: Rs.5,000 per day from the date of appointment till
in private companies and 15 in public companies. the date of cessation.
14 Section 191(5) Payment to Director for Loss of Office, etc., in Penalty on the Director: Rs.1 lakh.
Connection with Transfer of Undertaking, Property or
Shares - Non-compliance with Section 191
15 Section 197(15) Non-compliance in relation to the payment of Penalty on the Officer in default: Rs.1 lakh.
Managerial Remuneration, Penalty on the Company: Rs.1 lakh.
16 Section 203(5) Non-compliance in relation to the Appointment of  Penalty on the Company: Rs.5 lakhs.
KMP.  Penalty on the Director and KMP: Rs.50,000 and Rs.1000 per day till the
date of default subject to maximum of Rs.5 lakhs.
17 Section 238(3) Circulation of offer of scheme involving transfer of Penalty on the Director: Rs.1 lakh.
shares before filing with ROC
18 Section 447 Punishment for Fraud Where amount involved in the Fraud is Rs.10 lakhs or is 1% of the turnover
of the company:
Person shall be punishable with imprisonment for 6 months to 10 years; and
liable to fine which shall not be less than the amount involved in the fraud,
but which may extend to 3 times the amount involved in the fraud.

Where amount involved in the Fraud is less than Rs.10 lakhs or is less than
1% of the turnover of the company:
Person shall be punishable with imprisonment for 5 years or fine which may
extend to Rs.50 lakhs.

2. Addressing the repeated defaults:

As per newly inserted section 454A, where a penalty in relation to a default has been imposed on a person under the provisions of CA 2013, and the person
commits the same default within a period of 3 years from the date of order imposing such penalty, passed by the adjudicating officer or RD as the case may be, 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
CA 2013.

3. De-clogging the NCLT:

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The jurisdiction of Regional Director (“RD”) has been enlarged by enhancing the pecuniary limits up to which they can take up the cases of compounding the
offences from Rs.5 lakhs to Rs.25 lakhs.

Further, the RD has been vested with the following additional powers:
 to approve the alteration in the financial year of a company; and
 to approve cases of conversion of public companies into private companies.

4. Corporate governance related reforms:

(i) Commencement of Business:

 The Public Limited Companies having share capital are required to file the declaration with the ROC, before the commencement of business or exercising the
borrowing powers, within 180 days from the date of incorporation, inter-alia, to state that every subscriber to MOA has paid the share subscription money.
 Penalty for Non-compliance:
- On the Company- Rs.50,000
- On the Officer in default: Rs.1000 per day till the date of default subject to maximum of Rs.1 lakh.

(ii) Verification of the Company’s Registered Office by ROC:

In case the ROC has a reasonable cause to believe that the company is not carrying on any business or operations, he may, cause a physical verification of the
registered office of the company. If any default is found in relation to the non-maintenance of the Registered Office, he may initiate action for the removal of the
name of the company from the register of companies.

(iii) Significant Beneficial Owners of a company:

 The concept of SBO aims at identification of the individual person (whether acting alone or though his relative) who is ultimate owner/holder of the Company’s
shares in an indirect manner through another Company/Body Corporate/Partnership Firm/Trust who is holding shares/voting rights/control in the Company.
 The first trigger point is the Company’s shareholder who is either Company/Body Corporate/Partnership Firm/Trust holding 10% or more shares/voting
rights/control in the Company. Second threshold limit is the individual person who is a holder of more than 50% shares in the said Company/ Body Corporate.
 As per BEN rules, the individual who is SBO is required to provide a declaration to the Company in Form BEN-1 and the Company in turn is required to report
the same to the ROC in Form BEN-2. The extended due date for filing of Form BEN-2 by the Company is 30th September 2019.
 BEN Rules are not applicable in case where the individuals are directly holding shares in the Company in their individual capacity.
 Willfully furnishing of false/incorrect information or suppressing of material information will tantamount to fraud and will attract the penalties under Section 447 of
CA, 2013.

(iv) A Director accepting directorships beyond specified limits i.e. 20 in private companies and 15 in public companies will be subject to the disqualification to
become/hold a position of a director.

(v) In addition to the public companies, all other companies are also required to hold its shares in the Demat Form.

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(vi) CSR Related provisions:
 Any CSR amount remained unspent is required to be transferred by the Company into the escrow account within 30 days from the end of Financial Year.
 Amount maintained in such escrow account is to be utilized for the CSR activities as per the Company’s CSR policy within a period of 3 years.
 On failure to spend the CSR amount within 3 years, the Company is required to transfer the said amount to IEPF Account of the GOI.
 Penalty for Non-compliance:
- On the Company- Ranging from Rs.50,000 to Rs.25 lakhs.
- On the Officer in default: Imprisonment for 3 years and Fine ranging from of Rs.5 lakhs or both.

(vii) National Financial Reporting Authority (NFRA) rules have been notified by MCA pursuant to which NFRA will regulate and monitor the compliance of the
accounting and auditing standards by the Audit Firms. In case of any professional misconduct is proved, NFRA has the power to debar the Auditor of the
class of companies notified by MCA from being appointed as an auditor or internal auditor or undertaking any audit in respect of financial statements or
internal audit of the functions and activities of any company or body corporate; or performing any valuation as provided under section 247 for a minimum
period of 6 months or such higher period not exceeding 10 years.

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