Companies (Amendment) Act 2019

Posted by


Notified on 31 st July, 2019

IN ADDITION TO CHANGES MADE THROUGH COMPANIES (AMENDMENT) ORDINANCE 2019  w.e.f FROM 2 ND NOVEMBER, 2018.

1. Amendment to Section 26 – Matter to be stated in prospectus
The requirement for registration of prospectus shall be replaced with filing of prospectus with the Registrar.

2. Amendment to Section 29 – Public Offer of Securities to be in Dematerialised Form

a) in sub-section (1), in clause (b), the word “public” shall be omitted;

The provision of section 29 has been extended to all companies (public and private).

b) Insertion of New sub-section 1A
Earlier on September 10, 2018, MCA vide the Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2018 inserted a new rule 9A w.e.f 2 nd October 2018 which provides an obligation on unlisted public companies to issue of securities in dematerialized form.
In continuance to same, the Act seeks to insert a new sub-section 1A to Section 29 which provides -
” In case of such class or classes of unlisted companies as may be prescribed, the securities shall be held or transferred only in dematerialised form in the manner laid down in theDepositories Act, 1996 and the regulations made thereunder.”.

3. Amendment to Section 35 – Civil Liability for mis-statement in prospectus

In sub-section (2), in clause (c), for the words “delivery of a copy of the prospectus for
registration”, the words “filing of a copy of the prospectus with the Registrar” shall be
substituted.

From onwards the copy of prospectus shall be filled with Registrar instead of delivery for
registration.

4. Amendment to Section 90 – Register of significant beneficial owners in a Company

a) Insertion of new sub-section 4A :
“Every company shall take necessary steps to identify an individual who is a significant beneficial owner in relation to the company and require him to comply with the provisions of this section.”

b) Insertion of new sub-section 9A-
The said sub-section inserted to grant the power to the Central Government to make rules for the purpose of this section.

5. Amendment to Section 132 – Constitution of National Financial Regulatory Authority

a) Insertion of new sub-section 1A:
The National Financial Reporting Authority shall perform its functions through such
divisions as may be prescribed.”

b) Insertion of new sub-section 3A:
Each division of the National Financial Reporting Authority shall be presided over by the Chairperson or a full-time Member authorised by the Chairperson.

c) Insertion of new sub-section 3B:
There shall be an executive body of the National Financial Reporting Authority consisting of the Chairperson and full-time Members of such Authority for efficient discharge of its functions under sub-section (2) other than clause (a) and sub-section (4).

d) Debarring of the member or firm from –

(i) being appointed as an auditor or internal auditor or undertaking any audit in
respect of financial statements or internal audit of the functions and activities of
any company or body corporate; or

(ii) performing any valuation as provided under section 247,
for a minimum period of six months or such higher period not exceeding ten years as
may be determined by the National Financial Reporting Authority in case of professional or other misconduct is proved.

6. Amendment to Section 135 – Corporate Social Responsibility

a) After the words “three immediately preceding financial years,”, the words “or where
the company has not completed the period of three financial years since its
incorporation, during such immediately preceding financial years,” shall be inserted;

b) Earlier as per the provision of the Companies Act, 2013 provides that if a company
fails to spend CSR amount, the Board shall, in its report, specify the reasons for not
spending the amount.

Now the Act provides in addition to above a mandatory obligation on the Companies
that unless the unspent amount relates to any ongoing project referred to in
subsection (6), transfer such unspent amount to a Fund specified in Schedule VII,
within a period of six months of the expiry of the financial year”

c) Insertion of new sub-section 6:

Any amount remaining unspent pursuant to any ongoing project undertaken by a
company in persuance of its Corporate Social Responsibility Policy, shall be
transferred by the company within a period of thirty days from the end of the
financial year to a special account to be opened by the company in that behalf for
that financial year in any scheduled bank to be called the Unspent Corporate Social
Responsibility Account, and such amount shall be spent by the company in
pursuance of its obligation towards the Corporate Social Responsibility Policy within
a period of three financial years from the date of such transfer, failing which, the
company shall transfer the same to a Fund specified in Schedule VII, within a period
of thirty days from the date of completion of the third financial year.

d) Insertion of new sub-section 7: Penal Provision
If a company contravenes the provisions of sub-section (5) or sub-section (6), the
company shall be punishable with fine which shall not be less than 50,000 rupees
but which may extend to 25 lakh rupees and every officer of such company who is in
default shall be punishable with imprisonment for a term which may extend to three
years or with fine which shall not be less than fifty thousand rupees but which may
extend to five lakh rupees, or with both.

e) Insertion of new sub-section 8:
The Central Government may give such general or special directions to a company or
class of companies as it considers necessary to ensure compliance of provisions of
this section and such company or class of companies shall comply with such
directions.”

7. Amendment to Section 212 - Investigation into Affairs of Company by Serious Fraud Investigation Office

a) Any officer not below the rank of Assistant Director of Serious Fraud Investigation
Office (SFIO), if so authorised, may arrest any person in accordance with the
provision of this section.;

b) The person so arrested may be taken to a Special Court or Judicial Magistrate or
Metropolitan Magistrate within twenty four hours of his arrest.

c) Insertion of new sub-section 14A:
Where an investigation report submitted by SFIO states that a fraud has taken place
and any director, key managerial personnel or other officer of the company or any
other person or entity has taken undue advantage or benefit, then the Central
Government may file an application before Tribunal with regard to disgorgement of
such asset, property or cash and for holding such director, key managerial
personnel, other officer or any other person liable personally without any limitation
of liability.

8. Amendment to Section 241 - Application to Tribunal for Relief in Cases of Oppression,
etc.

a) Central Government to prescribe such company or class of companies in respect of
which, applications under sub-section, shall be made before the Principal Bench of
NCLT and shall be dealt with by such bench.

b) Insertion of new sub-section 3:
Where in the opinion of the Central Government there exist circumstances
suggesting that

I. any person concerned in the conduct and management of the affairs of a
company is or has been in connection therewith guilty of fraud, misfeasance,
persistent negligence or default in carrying out his obligations and functions
under the law or of breach of trust;

II. the business of a company is not or has not been conducted and -managed by such person in accordance with sound business principle or prudent commercial practices;

III. a company is or has been conducted and managed by such person in a
manner which is likely to cause, or has caused, serious injury or damage to the
interest of the trade, industry or business to which such company pertains; or

IV. the business of a company is or has been conducted and managed by
such person with intent to defraud its creditors, members or any other person or
otherwise for a fraudulent or unlawful purpose or in a manner prejudicial to
public interest,

the Central Government may initiate a case against such person and refer the same
to the Tribunal with a request that the Tribunal may inquire into the case and record
a decision as to whether or not such person is a fit and proper person to hold the
office of director or any other office connected with the conduct and management
of any company.

c) Insertion of new sub-section 4:
The person against whom a case is referred to the Tribunal under sub-section (3),
shall be joined as a respondent to the application.

d) Insertion of new sub-section 5:
Every application under sub-section (3)–
I. shall contain a concise statement of such circumstances and materials as
the Central Government may consider necessary for the purposes of the inquiry; and
II. shall be signed and verified in the manner laid down in the Code of Civil
Procedure, 1908, for the signature and verification of a plaint in a suit by the Central
Government.”

9. Amendment to Section 242 – Powers of Tribunal

Insertion of new sub-section 4A:
In matters under section 241, the Tribunal shall record its decision stating specifically as to whether or not the respondent is a fit and proper person to hold the office of director or any other office connected with the conduct and management of any company.

10. Amendment to Section 243 - Consequence of Termination or Modification of Certain Agreements    

a) Insertion of new sub-section 1A:
The person who is not a fit and proper person pursuant to section 242 shall not hold
the office of a director or any other office connected with the conduct and
management of the affairs of any company for a period of five years from the date
of the decision of the Tribunal.

Provided that the Central Government may, with the leave of the Tribunal, permit
such person to hold any such office before the expiry of the said period of five years

b) Insertion of new sub-section 1B:
Notwithstanding anything contained in any other provision of this Act, or any other
law for the time being in force or any contract, memorandum or articles, on the
removal of a person from the office of a director or any other office connected with
the conduct and management of the affairs of the company, that person shall not be
entitled to, or be paid, any compensation for the loss or termination of office

11. Amendment to Section 398 – Provision relating to filing of applications, documents, inspection, etc. in Electronic Form Prospectus not required to be registered by the Registrar.


ABOUT THE AUTHOR




Aakarshit Jai: Commerce Graduate and Company Secretary Aspirant.


We're delighted to announce the launch of a new monthly digital magazines. The magazine will be packed with legal developments and implications in law. Just fill this short form to get this magazine in your inbox for free.

https://docs.google.com/forms/d/e/1FAIpQLSeOVjOKG5dRMq_hLPKRGODgaUTgwB6OsDLNCSxAmVractU07g/viewform?usp=sf_link 

To join our whats app group click here  
https://chat.whatsapp.com/H1yc7jfKTOTLJry

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.


This article is a property of lawthoro and no part of it shall be reproduced in any manner without our explicit permission.

We invite professionals or students who have a passion to write Legal Blogs. You can send your article at lawthoro@gmail.com and it will be published after appraisal

Comments

Post a Comment