Annual Compliance Compliances

Company Law update: Highlights of Companies (Amendment) Ordinance, 2019

Companies (Amendment) Ordinance, 2019 which has just been introduced by the Government makes the intention of the Government very clear. It thereby brings amendment in Companies Act, 2013. Now, no more leniency are provided as the Government will take strict action against any company which does not take their compliance seriously.

What is the objective of amendment in Companies Act, 2013?

The two main objectives of the amendment in Ordinance are:

• Promotion of Ease of Doing Business
• Better corporate compliance.

Now let us try to understand through this article about the key highlights of the ordinance.

When does the amendment in Companies Act, 2013 took place?

The President has promulgated the Companies (Amendment) Ordinance, 2019, which came into effect from 2^nd November, 2018 and has ceased to operate on 21^st January, 2019. This new ordinance further brings amendment in Companies Act, 2013 which was previously amended by an ordinance in 2018.

Moreover, The Ministry of Law and Justice has issued the Companies (Amendment) Ordinance, 2019 to give continued effect to the provisions of the Companies (Amendment) Ordinance, 2018 and to further amend the Companies Act, 2013.

What are the Key Highlights of amendment in Companies Act, 2013?

The Companies (Amendment) Bill, 2019 has been passed by the House of People on 4^th January, 2019 and has taken effect from 21^st January, 2019.

Some of the highlights are:

1.Commencement Certificate:

This certificate is now mandatory to be obtained under section 10A within six months of Incorporation without which it cannot commence its business activities or can borrow money.

2. Matters of conversion of Public Ltd to Private Ltd:

All the matters are now shifted from NCLT to Regional Directorate who is essentially a representative of Central Government. This should ease some work load from NCLT which is already under tremendous burden due to huge amount of Insolvency cases.

3. Company cannot issue shares at discount:

If the company issues shares at discount, then it would be liable to a Penalty equal to the amount raised by issuing shares at a discount or five lakh rupees, whichever is lower. Additionally, the company will also be liable to refund the amount with 12% interest.

4. Alteration of Authorized Capital u/s 64 to be intimated within 30 days:

In case, the above alteration is not intimated within 30 days, then the penalty for an amount of Rs. 1000 every day or 5 Lac, whichever is less will be applicable.

5. Registration of charges:

 Now it must be done within 300 days if the charges are created before the commencement of the ordinance and within 60 days if created after the commencement of the ordinance

6. Annual Returns should be filed:

Now annual returns must be filed within 60 days from Annual General Meeting. In case of failure to do this, penalty of Rs. 100 per day to Company and director up to Rs. 5 Lakh. Apart from this ROC delay charges is also applicable. Additionally, a Penalty of Rs. 5 lakh on Company Secretary for certifying wrong Annual Return.

7. Explanatory statement:

This must be given with Notice of General Meeting. Moreover, It must contain all details as required by Law otherwise penal consequences

8. Filing of Resolutions with ROC is very important:

Delay will be very costly now. Penalty for defaulter increased substantially. In case of failure to file resolution or any agreement within time shall attract a penalty on Company amounting to Rs. 1 lakh and in case of continuing failure Rs. 500 for each day upto maximum of Rs.  25 lakhs. Also the Officer who is in default which includes liquidator would be liable to penalty of Rs. 50000 and in case of continuing failure, Rs. 500 for each day for a maximum amount of Rs. 5 lakhs

9. Resignation of Auditor:

If an auditor fails to file e-Form ADT-3 within 30 days of his resignation he shall be liable for a penalty of Rs. 50,000 or an amount equal to his/her remuneration whichever is lower, with an daily penalty of Rs. 500 each day if the failure continues.

10. Appointment of CS on payroll:

 Appointment of a Company Secretary by a Private Company having paid-up capital of Rs. 5 crore & above is mandatory. Default is now very costly- penalty increased substantially. Further, a penalty of rupees one thousand shall be levied daily till the default continues, however the same shall not exceed rupees five lakhs.

11. Register of significant beneficial owners in a company (Section 90):

Any aggrieved party can make an application to the Tribunal within 1 year from date of such order. However,  in case no application is made within this time, then such shares shall be transferred to Investor Education and Protection Fund (IEPF). Person failing in making declaration shall be imprisoned for 1 year along with the fine which is applicable and may even be levied fine and imprisonment both.

12. Strike off the company:

If the Registrar has enough reason to believe that a company is not carrying on business then it can after a physical verification of the registered office can delete the company’s name from the register of companies. ROC may also strike off the registered users if subscribers have not paid initial share capital and filed requisite Form after incorporation of a Company within 6 months.

Conclusion

The above amendments through Companies (Amendment) Ordinance, 2019 are mandatory and need to be complied with. It has replaced Companies (Amendment) Ordinance, 2018. Non-compliance of any of the above amendments may result in huge cost and bad reputation. However, The content of this article is intended to provide a general guide to the amendment in Companies Act.  For more details on the above amendments, contact the team of experts at Enterslice.