www pwc in Companies Amendment Act 2019 21

www. pwc. in Companies (Amendment) Act, 2019 21 September 2019

Journey Companies (Amendment) Ordinance, 2018 [Promulgated by President on 02 November 2018] Pw. C Companies Amendment Act, 2019 [31 July 2019] Companies (Amendment) Bill, 2019 [passed by Lok Sabha on 04 Jan 2019] [passed by Lok Sabha on 26 July 2019] Companies (Amendment) Ordinance, 2019 Companies (Amendment) Second Ordinance, 2019 [Promulgated by President on 12 January 2019] [Promulgated by President on 21 February 2019]

Companies (Amendment) Act, 2019 • The Companies (Amendment) Act, 2019 (“CAA 2019”) has not only taken into consideration the amendments that were originally notified in the Companies (Amendment) Ordinance, 2018, Companies (Amendment) Ordinance, 2019 and Companies (Amendment) Second Ordinance, 2019 but has also brought about other key changes • The amendments implemented through the ordinances have already been in effect since 02 November 2018 • Other than the above, certain amendments under CAA 2019 have been notified on 14 August 2019, while certain others are yet to be notified Key Objective 1 • De-criminalization of non-serious or procedural offences Pw. C Key Objective 2 • Institution of transparent and technology driven adjudication mechanism Key Objective 3 • De-clogging the NCLT by shifting certain powers to the Regional Director Key Objective 4 • Controlled governance to curb Shell Companies 3

Companies (Amendment) Act, 2019 [Effective from 02 November 2018] Companies incorporated after 2 November, 2018 with share capital, shall not commence any business or exercise any borrowing powers unless: • A declaration is filed by a director within 180 days of the date of incorporation, confirming that every subscriber has paid the value of Re-introduction of shares agreed to be taken Declaration of • Company has filed the verification of its registered office with the Commencement Registrar of Business In case no declaration is filed within 180 days of incorporation and the registrar has reasonable cause to believe that the company is not conducting any business or operations, the registrar may initiate the removal of its name from the register of companies Power to Registrar for Physical Verification of Registered Office Pw. C Registrar has been vested with the power to conduct physical verification of the registered office and initiate strike-off of the company, if there is reasonable cause to believe that the company is not conducting any business or operations 4

Companies (Amendment) Act, 2019 [Effective from 02 November 2018] Certain offences have been re-categorised as defaults carrying civil liabilities to bring them under an in-house adjudication mechanism. The key provisions amended are as follows: • Issue of shares at a discount (Sec. 53) • Intimation to Registrar for alteration of share capital (Sec. 64) • Non-filing of annual return within the due date (Sec. 92) • Default in complying explanatory statement requirements (Sec. 102) • Default in complying with proxy requirements (Sec. 105) Decriminalisation • Failure/ delay in filing certain resolutions (Sec. 117) of Certain • Failure to file report on AGM (Sec. 121) Offences • Failure/ delay in filing financial statement (Sec. 137) • Failure/ delay in filing statement by the auditor after resignation (Sec. 140) • Contraventions related to Director Identification Number (Sec. 157) • Contravention in appointment of Directors (Sec. 159 and Sec. 165) • Managerial remuneration (Sec. 197) • Appointment of Key Management Personnel in certain class of companies (Sec. 203) Pw. C 5

Companies (Amendment) Act, 2019 [Effective from 02 November 2018] SBO Penalty for repeated default Responsibility is cast upon the Company New section inserted Where a second default is committed by a company or an officer who has already been subject to penalty for that default within a period of 3 years prior to such second default, such company or officer shall be liable to penalty for an amount equal to twice the earlier penalty charged • De-clogging of NCLT Pw. C • Offences (with only fine or imprisonment or fine), where the maximum amount of fine is up to INR 25 lac will be compounded by the RD The earlier limit was up to INR 5 lac only, and any matter beyond such limit had to be compounded with the NCLT The applications for change of financial year and conversion of a company from public to private are now to be made to the Central Government (i. e. RD) instead of the NCLT

Companies (Amendment) Act, 2019 [Effective from 14 August 2019] Prospectus for public offer The previous provision required a company to deliver a copy of the prospectus to the registrar for registration. However, with the amendment, the requirement has been changed from “registration” to “filing” Dematerialisation The Central Government can now prescribe and mandate even private of securities limited companies to issue and hold securities in DEMAT form • Powers of the Central Government and NCLT in case of oppression and mismanagement Pw. C • The Central Government is now empowered to initiate a case against unfit and improper persons (i. e. persons concerned in the conduct and management of a company, who have been found guilty of fraud, misfeasance, not conducting the business in accordance with sound business principles or practices, etc. ) and refer the same to NCLT to make inquiry and give its decision NCLT is now empowered to determine, in case of oppression and mismanagement, if a person connected with any conduct or management of the company, is fit and proper. In case the NCLT concludes that such a person is not fit and proper, then such person can be debarred from holding an office of director or any other office connected with a company for a period of 5 years. Further, such person shall not be entitled to be paid any compensation for the loss of office

Companies (Amendment) Act, 2019 • • • Corporate Social Responsibility • Pw. C For the companies who have not completed three years, the amount of CSR contribution shall be calculated on the average of net profits for the years since incorporation The unspent CSR amount, except for the amount that relates to any ongoing projects, is required to be transferred to any of the funds mentioned in Schedule VII of CA 2013, within a period of 6 months from the end of the financial year (FY) The unspent amounts in relation to ongoing projects should now be transferred to a separate bank account within 30 days from the end of FY, and such amount should be spent within a period of 3 FYs from the date of such transfer. In case such amount remains unspent after completion of 3 FYs, the said amount is then required to be transferred to any of the funds mentioned in Schedule VII, within a period of 30 days from the date of completion of the third FY. Penalty provisions for non-compliance of the CSR provisions has been introduced. As per the new provision, the failure to comply with the CSR provisions makes the company liable to a fine ranging from INR 50, 000 to INR 2, 500, 000, and every officer in default can be punished with imprisonment that may extend to 3 years or with a fine ranging from INR 50, 000 to INR 500, 000 or both

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