The Companies (Amendment) Bill 2019, which seeks to amend the Companies Act 2013 was passed by the Lok Sabha on July 26.
FM minster Nirmala Sitharaman said that the Bill containing 44 clauses is being brought in to “ensure more accountability and better enforcement to strengthen the corporate governance norms and compliance management in corporate sector”.
The Bill aims to tighten Corporate Social Responsibility (CSR) compliance, re-categorisation of specific offences as civil offences and transfer certain responsibilities to National Company Law Tribunal.
Major Highlights of the Companies (Amendment) Bill
- Measures to control ‘shell companies’
New section 10A was proposes to control shell companies. As per the provisions of this section, it mandatory for new companies to file a declaration with the concerned Registrar within 180 days of date of incorporation.
Declaration shall contain “that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration”.
Non-filing of such a declaration can be a ground for removal of the company from the register of companies on grounds of non-commencement of business.
Till now, four lakh shell companies have been de-registered and now it has been made mandatory that a company while carrying out business should have a physical address and physical maintenance of a register.
- Modification of punishment of fine
Bill also provides to amend Sixteen sections of the Act to modify the punishment from fine to monetary penalties to lessen the burden upon the Special Courts.
- Provisions to deal with unspent CSR amount
A key change in the Bill pertains to Corporate Social Responsibility (CSR) spending is incorporated, wherein companies would have to mandatorily keep unspent money in a special account.
Accordingly, Section 135 is amended to carry forward the unspent corporate social responsibility amount, to a special account to be spent within three financial years and transfer thereafter to the Fund specified in Schedule VII, such as PM’s National Relief fund.
Also Read: No escaping option from tighter CSR norms
- Debarring of erring auditors
The Bill provides for the punishment for debarment from appointment as an auditor or internal auditor of a company, or performing a company’s valuation, for a period between six months to 10 years in case of proven misconduct.
- Expanding the power to compound offences
The pecuniary limits of Regional Director (“RD”) to compound offences under section 441 of the Act is proposed to be increased. The threshold is proposed to be increased to fine up to Rs. 25 lakhs.
- Disqualification of director
A new clause has been inserted under the Section 164 to state that violation of Section 165(1) shall be a ground for disqualification of a director, if he/ she breaches the limits of maximum directorship allowed there under.
- Shifting of powers
It also provides for transferring of functions with regard to dealing with applications for change of financial year to Central government and shifting of powers for conversion from public to private companies from NCLT to the central government.