The MCA (Ministry of Corporate Affairs) issued a notification on January 22, 2021 stating that the 11 new provisions of the Companies (Amendment) Act 2020 would take effect immediately.
|Industry experts have hailed the Companies (Amendment) Act 2020. They have opined that the amendment is a welcome move towards India’s goal to improve the ease of doing business in the country. However, the benefits of these amendments with respect to overseas listing, the scope of listed companies, beneficial ownership and other aspects can only be tested once the Government notifies corresponding rules in this regard.|
The Lok Sabha passed the Companies (Amendment) Act in September 2020. The Act was passed as a means to amend 48 Sections of the Companies Act of 2013. The amendment was passed in order to decriminalize certain offenses. Further, speaking on the Bill, Finance and Corporate Affairs Minister Nirmala Sitharaman said in the Parliament that decriminalization of these provisions under the Companies Act will help small companies by reducing the threat and burden of litigation on them.
11 New Provisions to the Companies (Amendment Act) 2020
- Section 2(52) – This section deals with the definition of a ‘listed company’. Vide this amendment; the Central Government has been given the power to exclude certain companies from the definition of listed companies. Further, the Government can exercise this power based on the listing of securities on stock exchanges, in consultation with SEBI. This means companies listing only non-convertible debt instruments will cease to be deemed as ‘listed companies’ henceforth.
- Section 11– This section has amended Section 62 of the Companies Act 2013 which deals with the issue of share capital. Additionally, this new amendment seeks to reduce the timeline for applying for rights issues.
- Section 18– This section seeks to amend Section 89 of the Companies Act 2013. It has empowered the Central Government to notify class(es) of persons who may be exempted from complying with Section 89 of the Act (this excludes sub-section 10).
- Section 22, Clause (ii) – This section seeks to amend Section 117 of the Companies Act 2013. It has empowered the Central Government to exempt a class of NBFCs and HFCs from the filing of resolutions passed to issue guarantees/loans/loan securities during the normal course of business. Do note that only Banks used to enjoy this exemption earlier.
- Section 25- Vide this amendment, the Central Government can ask unlisted companies to file periodical financial results of the company with the Registrar within 30 days from the end of a specified period. The Government can also carry out audits or limited reviews of such results.
- Section 27– This section seeks to amend Section 135 of the Companies Act 2013. Henceforth, companies can set off the excess CSR amount spent (over & above the required 2%) in the succeeding financial year. Also, in cases where the amount does not exceed Rs 50 lakhs. The mandatory requirement to constitute a CSR committee will no longer be applicable.
- Section 53 – This section seeks to amend Section 379 of the Companies Act 2013. As per the amendment, the provision to exempt any class of foreign companies from any of the provisions of Sections 380 to 386, 392, and 393 has been dispensed with.
- Section 55 – The amendment has inserted a new section (393 A) into the Act. This empowers the Central Government to exempt any foreign company or company to be incorporated outside India, from the provisions of Chapter XXII of the Act.
- Section 58 to 60–
- The restriction on the number of technical and judicial members, to be appointed by the Central Government in the Appellate Tribunal, has been lifted.
- A new section (Sec 418 A) has been added to constitute additional/specialized NCLAT benches. This is expected to speed up the disposal of appeals considerably.
- Further, the offense of and punishment for wrongful withholding of property (Section 452) will be excluded from the applicability of the Special Court.
- Section 62 – Has made provisions for lesser monetary penalties being imposed for One Person Companies, startups, producer companies and other smaller companies against the failure to comply with certain provisions of the Act.
- Section 64 and 65 – Has mandated that a competent court shall not order the imprisonment of any company official for wrongful withholding of property; provided the Court is satisfied that such an official has not received any statutory. ie statutory dues from the company. Also, no monetary penalty will be levied in case of a default related to non-compliance with Annual Return or Section 137(1)/ (2) and Section 92(4). Also, the monetary penalty has been dispensed with in cases where the filing of Financial Statements has been rectified prior to or within 30 days of the issue of notice by the adjudicating officer.
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