India - Companies Amendment Act, 2020.

Updated: Jan 29










The Companies Amendment Act 2020 has introduced several measures to improve the ease of doing business and de-criminalize certain offences. The Companies Amend. Act,2020 was published in the official Gazette on Sept. 28th 2020 which came into effect on 21st December 2020.

The said Act does away with imprisonment because of violation of certain provisions of Companies Act, 2013. It reduces and modifies the fines and penalties offences under the Companies Act. The write up attempts briefly discuss the provisions and the amendment therein.



Amend. Act / Companies Act,2013

****

Old Provision

*****

New Provision

Sec. 3 / Sec.8


***


Director and every officer of the company who is in default shall be punishable with:

Imprisonment:

Maximum- 3 years

OR

Fine:

Minimum- Rs. 25 thousand;

Maximum- Rs. 25 lakh.

OR

Both

***

Director and every officer of the company who is in default shall be punishable with:

Fine:

Minimum- Rs. 25 thousand;

Maximum- Rs. 25 lakh.


Sec. 6 / Section 26:Matters to be stated in prospectus


***


Every person who is knowingly a party to the issue of such prospectus shall be punishable with:

Imprisonment:

Maximum- 3 years

OR

Fine:

Minimum- Rs. 50 thousand;

Maximum- Rs. 3 lakh.

OR

Both


***


Every person who is knowingly a party to the issue of such prospectus shall be punishable with:

Fine:

Minimum- Rs. 50 thousand;

Maximum- Rs. 3 lakh.

Sec. 7 / Section 40:Securities to be dealt with in stock exchanges


***


Every officer of the company who is in default shall be punishable with:

Imprisonment:

Maximum- 1 year

OR

Fine:

Minimum- Rs. 50 thousand;

Maximum- Rs. 3 lakh.

OR

Both


***


Every officer of the company who is in default shall be punishable with:

Fine:

Minimum- Rs. 50 thousand;

Maximum- Rs. 3 lakh.

Sec. 8 / Section 48- Variation of shareholders’ rights


***


In case of Default in complying with the provisions relating to variation of shareholders’ rights Company shall be punishable with and officers in default with imprisonment.

***


Omitted

Sec. 9 Section 56: Transfer and transmission of securities


***


Where default is made in complying with this section


***

Company shall be punishable with:

Fine:

Minimum- Rs. 25 thousand;

Maximum- Rs. 5 lakh.

Every officer of the company who is in default shall be punishable with:

Fine:

Minimum- Rs. 10 thousand;

Maximum- Rs. 1 lakh.


***


Company and every officer of the company who is in default shall be liable to a penalty of Rs. 50 thousand.

Sec. 10 / Section 59: Rectification of register of members.


***


If any default is made in complying with the order of the Tribunal under this section, the company

shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for

a term which may extend to one year or with fine which shall not be less than one lakh rupees but which

may extend to three lakh rupees, or with bot


***

Omitted

Sec. 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.

Sec. 13 / Section 66- Reduction of share capital


***


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

***


Omitted

Sec. 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.

Every officer of the company who is in default shall be punishable with:

Imprisonment:

Maximum- 3 years

OR

Fine:

Minimum- Rs. 1 lakh;

Maximum- Rs. 3 lakh.

OR

Both


***


Every officer of the company who is in default shall be punishable with:

Fine:

Minimum- Rs. 1 lakh;

Maximum- Rs. 3 lakh.

Sec. 15 / Section 71- Debentures


***


Penalty imposed In case of default in complying with the order of Tribunal relating to redemption of debentures.

***


omitted

Sec. 16 / Section 86- Punishment for contravention


***


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

Company shall be punishable with:

Fine:

Minimum- Rs. 1 lakh;

Maximum- Rs. 10 lakh.

Every officer of the company who is in default shall be punishable with:

Imprisonment:

Maximum- 6 months

OR

Fine:

Minimum- Rs. 25 thousand;

Maximum- Rs. 1 lakh.

OR

Both

***


Company shall be liable to a penalty of Rs. 5 lakh and every officer of the company who is in default shall be liable to a penalty of Rs. 50 thousand.

Sec. 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.

Company shall be punishable with:

Fine:

Minimum: Rs. 50 thousand;

Maximum: Rs. 3 lakh and where the failure is a continuing one, with a further fine which may extend to Rs. 1,000 for every day, after the first during which the failure continues.

Every officer of the company who is in default shall be punishable with:

Fine:

Minimum: Rs. 50 thousand;

Maximum: Rs. 3 lakh and where the failure is a continuing one, with a further fine which may extend to Rs. 1,000 for every day, after the first during which the failure continues.


***


Company shall be liable to a penalty of Rs. 3 lakh and every officer of the company who is in default shall be liable to a penalty of Rs. 50 thousand.

Sec. 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.

Such person shall be punishable with:

Fine:

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

The fine by the company and the imprisonment to the officers is reduced and omitted

Such person shall be liable to a penalty of Rs. 50 thousand and in case of continuing failure, with a further penalty of Rs. 200 for each day after the first during which such failure continues, subject to a maximum of Rs. 5 lakh.

***

Company and every officer of the company who is in default shall be liable to a penalty of Rs. 1,000 for each day during which such failure continues, subject to a maximum of Rs. 5 lakh in the case of a company and Rs. 2 lakh in case of an officer who is in default.

Sec. 19 / Section 90- Register of significant beneficial owners in a company



***


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.

The penalty and punishment therein has been reduce.


***


Company shall be liable to a penalty of Rs. 1 lakh and in case of continuing failure, with a further penalty of Rs. 500 for each day, after the first during which such failure continues, subject to a maximum of Rs. 5 lakh and every officer of the company who is in default shall be liable to a penalty of Rs. 25 thousand and in case of continuing failure, with a further penalty of Rs. 200 for each day, after the first during which such failure continues, subject to a maximum of Rs. 1 lakh.

Sec. 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.

Sec. 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. The punishment and penalty is reduced.

***


Every officer of the company who issues the invitation as aforesaid or authorises or permits their issue shall be liable to a penalty of Rs. 50 thousand.

Sec. 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.

Sec. 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 The penalty is reduced.

***


Such MD, WTD in charge of finance, CFO or such other person of the company shall be punishable with:

Fine:

Minimum- Rs. 50 thousand;

Maximum- Rs. 5 lakh.

Sec. 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 the penalty is reduced.

***


Company shall be liable to a penalty of Rs. 3 lakh and every officer of the company who is in default shall be liable to a penalty of Rs. 50 thousand.

Sec. 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.

Sec. 29 / Section 140- Copy of financial statement to be filed with Registrar

Offence:

Changes:

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

Sec. 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.

Sec. 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 the penalty is reduced.

***


Such professional shall be liable to a penalty:

In case of a listed company: Rs. 5 lakh;

In case of any other company: Rs. 1 lakh.

Sec. 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.

Sec. 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.

Sec. 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 the punishment is reduced

***

Such person shall be punishable with:

Fine:

Minimum- Rs. 1 lakh;

Maximum- Rs. 5 lakh.

Sec. 35 / Section 172- Punishment


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

Company and every officer of the company who is in default shall be liable to a penalty of Rs. 50 thousand, and in case of continuing failure, with a further penalty of Rs. 500 for each day during which such failure continues, subject to a maximum of Rs. 3 lakh in case of a company and Rs. 1 lakh in case of an officer who is in default.

Sec. 36 / Section 178- Nomination and Remuneration Committee and Stakeholders Relationship Committee


In case of any contravention of the provisions of sections 177 and 178 Company shall be liable to a penalty of Rs. 5 lakh and every officer of the company who is in default shall be liable to a penalty of Rs. 1 lakh.

Sec. 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 the penalty is reduced

***


Such director shall be liable to a penalty of Rs. 1 lakh.

Sec. 38 / Section 187- Investments of company to be held in its own name


In case of contravention in the regards of this section Company shall be liable to a penalty of Rs. 5 lakh and every officer of the company who is in default shall be liable to a penalty of Rs. 50 thousand.

Sec. 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.

In case of listed company

Sec. 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. Company, every officer of the company or the company secretary in practice, who is in default, shall be liable to a penalty of Rs. 2 lakh.

Sec. 41 / Section 232- Merger and amalgamation of companies


If a transferor company or a transferee company contravenes the provisions of this section. Company and every officer of the company who is in default shall be liable to a penalty of Rs. 20 thousand, and where the failure is a continuing one, with a further penalty of Rs. 1,000 for each day after the first during which such failure continues, subject to a maximum of Rs. 3 lakh.

Sec. 43 / Section 242- Powers of Tribunal


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

Every officer of the company who is in default shall be punishable with:

Fine:

Minimum- Rs. 25 thousand;

Maximum- Rs. 1 lakh.

Sec. 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.

Fine:

Sec. 54 / Section 392- Punishment for contravention


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

Fine:

Sec. 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. Company and every officer of the company who is in default shall be liable to a penalty of Rs. 20 thousand and in case of continuing failure, with a further penalty of Rs. 1,000 for each day after the first during which such failure continues, subject to a maximum of Rs. 3 lakh.

Sec. 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. Such officer or employee shall be punishable with:

Fine:

Maximum- twice the amount provided in the corresponding section in which punishment for such offence is provided

Sec. 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 Company and every officer of the company who is in default or such other person shall be liable to a penalty of Rs. 10 thousand and in case of continuing contravention, with a further penalty of Rs. 1,000 for each day after the first during which the contravention continues, subject to a maximum of Rs. 2 lakh in case of company and Rs. 50 thousand in case of an officer who is in default or any other person.


Impact:

These amendments are a welcome step towards providing ease of doing business for Indian corporate. Reducing procedural offences and reducing the penalties and imprisonments attached therewith is a step towards the good of larger public interest and thus can be considered as a positive move. It will help companies avoid being tarnished by criminal sanctions for minor, technical or inadvertent lapses. The above amendments would encourage the companies to work with efficacy and yield more positive results.




For further information, please contact:

Ayush Anand, Partner, Atharva Legal

ayush@atharvalegal.com

Ananya Sahu, Atharva Legal

contact@atharvalegal.com

Register here for your monthly Asia legal updates