Explained: What is Companies (Second Amendment) Bill, 2019?
New Delhi, Mar 04: The Cabinet on Wednesday has approved the Companies (Second Amendment) Bill, 2019. The bill removes criminality under the Act. "This Bill furthers ease of living for law-abiding corporates and de-clogs the criminal justice system in the country," Sitharaman said.
So, what is The Companies (Second Amendment) Ordinance, 2019?
The Bill would remove criminality under the Act in case of defaults which can be determined objectively and which, otherwise, lack the element of fraud or do not involve larger public interest. This would also lead to further de-clogging of the criminal justice system in the country. The Bill would also further ease of living for law abiding corporates.
Here are the highlights of the Companies (Amendment) Act, 2019:
Re-categorisation of certain Offences: The 2013 Act contains 81 compoundable offences punishable with fine or fine or imprisonment, or both. These offences are heard by courts. The Ordinance re-categorizes 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.
Issue of shares at a discount: The Act prohibits a company from issuing shares at a discount, except in certain cases. On failure to comply, the company is liable to pay a fine between one lakh rupees and five lakh rupees every officer in default may be punished with imprisonment up to six months or fine between one lakh rupees and five lakh rupees. The Ordinance changes this to remove imprisonment for officers as a punishment.
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Further, the company and every officer in default will be liable to pay a penalty equal to the amount raised by the issue of shares at a discount or five lakh rupees, whichever is lower. The company will also be liable to refund the money received with interest at 12% per annum from the date of issue of the shares.
Commencement of business
The Ordinance states that a company may not commence business, unless it
files
a
declaration
within
180
days
of
incorporation,
confirming
that
every
subscriber
to
the
Memorandum
of
the
company
has
paid
the
value
of
shares
agreed
to
be
taken
by
him,
and
files
a
verification
of
its
registered
office
address
with
the
Registrar
of
Companies
within
30
days
of
incorporation.
If
a
company
fails
to
comply
with
these
provisions
and
is
found
not
to
be
carrying
out
any
business,
the
name
of
the
Company
may
be
removed
from
the
Register
of
Companies.
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 Ordinance, these powers have been transferred to central government.
Earlier, the Companies (Amendment) Act, 2015 amended certain provisions of the Act to remove difficulties faced in implementation of various provisions of the Act.