The Companies (Amendment) Act, 2019 was notified on 31 July 2019 and is deemed to have come into effect from 2 November 2018 i.e. the date on which the Companies (Amendment) Ordinance 2018 was promulgated. However, Sections 6, 7, 8, clauses (i), (iii), and (iv) of Section 14, 20, 31, 33, 34, 35, 37 and 38 have been made effective from 15 August 2019. Section 21, which amends Section 135 of the Principal Act, related to corporate social responsibility compliances, prescribing transfer of unspent CSR amount of ongoing projects to a Fund, punishable with fine and imprisonment has not been notified. The Finance Minister has since reviewed the penal provisions and decided to roll back the criminal liability for violation of CSR provisions. The government is also reviewing other penal provisions under the Principal Act with the view to restructure corporate offences, to relieve Special Courts from adjudicating routine offences as well as de-clog the NCLT through reduction of compounding cases before it.
Based on the recommendations received from a committee constituted by the Ministry of Corporate Affairs (MCA) and with the aim to re-categorize certain offences under the Companies Act, 2013 (2013 Act), the Companies (Amendment) Act, 2019 was passed by the Indian Parliament.The Amendment Act, amongst others, (a) re-categorizes certain offences under the 2013 Act, (b) expands the jurisdiction of the regional director, and (c) shifts certain powers from the National Company Law Tribunal (NCLT) to the central government thereby unclogging the NCLT. The offences which are procedural, technical or routine in nature have been shifted from a ‘fine’ regime to a ‘penalty’ regime. For example, the punishment for (a) failure or delay in filing of a notice for alteration of share capital, (b) failure or delay in filing of annual returns, (c) failure or delay in filing of financial statements, and (d) accepting directorship beyond the specified limit, are now subject to ‘penalty’ instead of ‘fine’. Additionally, the central government has been empowered to dispose of applications relating to change of financial year of a company and conversion of a public company into a private company. The jurisdiction of regional director has also been enhanced for compounding of offences.It is expected that these amendments would facilitate in increasing compliance and improving the corporate governance standards in India in the long run and allow for speedy disposal of offences.
This is intended for general information purposes only. The views and opinions expressed in this article are those of the author/authors and does not necessarily reflect the views of the firm.
The Bar Council of India does not permit solicitation of work and advertising by legal practitioners and advocates. By accessing the Shardul Amarchand Mangaldas & Co. website (our website), the user acknowledges that: