The Companies (Amendment) Ordinance, 2018 received its assent from President of India on July 31st, 2019. This Act shall be called as “The Companies (Amendment) Act, 2019.
Widening the scope of Financial Year
A company existing on the commencement of this Act and having its holding or subsidiary or associate company incorporated outside India shall be allowed to have a different financial year for consolidation of its accounts with a prior approval from Central Government as opposed to the approval from the Tribunal.
Given that the process will be thorough e-forms, it should be quicker and relatively smooth.
Commencement of Business
Companies incorporated post 2-Nov-18 and having share capital are mandated to file following forms before commencing any business:
- Declaration that every subscriber to Memorandum of Association has money toward shares taken by within 180 days of incorporation, and
- File a verification of its registered office.
Verification of Registered Office
If the Registrar of Companies (“ROC”) has reasonable cause to believe that the company is not carrying on any business, he may cause in-person verification of the registered office. The ROC may thereafter initiate action for the removal of the name of the company as well.
Easier Conversion of Public Companies
Conversion of Public company to Private company shall now require approval of Central government instead of the Tribunal. This endeavour is in the interest of stakeholders as they shall be released from the struggle of lengthy process since the hefty paperwork and tribunal’s tedious approvals shall reduce drastically.
Filing of prospectus now with ROC
The requirement of registration of prospectus to be replaced with filing of prospectus with the Registrar. This move shall reduce the time and efforts of a company and make the compliance of the whole process of public issue swift and smooth.
Dematerialisation of shares for prescribed Private companies
Private companies have been included in the ambit of Section 29. Thus, mandatory demat provisions may be made applicable on private companies & the rules in connection therewith shall be notified.
New rules for registration of charges
A charge on assets had to be created within 300 days before the commencement of this amendment Act. However, hereafter, all charges have to be registered within 60 days. This period can be further extended to 120 days with the approval of the ROC. However, additional fee shall be payable post 30 days. The fee schedule is as under
| Time period | Fees payable |
|---|---|
|
Within 30 days |
Normal fee |
|
Between 31-60 days |
6 times normal fees |
|
Between 61-120 days |
6 times normal fees plus ad valorem fees of 0.05% of amount secured by charge subject to maximum of Rs.5 lakhs |
Delays beyond 120 days shall not be taken on record.
Penalty on delayed filing of Annual Return
If any company fails to file its annual return( Form MGT-7 ) before the expiry of the period specified therein, such company and its every officer who is in default shall be liable to a penalty of fifty thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of five lakh rupees
Greater powers to NFRA
NFRA to perform its functions through such divisions as may be prescribed by the Central Government. Executive body of NFRA shall consist of the Chairperson and full-time Members for efficient discharge of its certain functions. Debarring of the member or firm by NFRA in case professional or other misconduct is proved.
Central Government granted powers for relief in case of oppression
The Central Government, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, it may itself apply to the principal bench of the Tribunal for an order.
Maximum Fine increased 5 times
The maximum amount of fine which may be imposed has been increased from earlier Rs.5 lakhs to Rs.25 lakhs now. Further, notwithstanding anything contained in the Code of Criminal Procedure, 1973, any offence which is punishable under this Act with imprisonment only or with imprisonment and with fine shall not be compoundable.
Amendment of section 135 of CA, 2013 – Corporate Social Responsibility
Section (5) (a) of Section 135 has been substituted with “Such preceding financial years” instead of “Three immediately preceding financial years “, Thereby removing the restriction of having minimum 3 years for applicability of CSR provisions.
Further, unspent balance will have to be transferred to the Funds specified in Schedule VII, e.g. Clean Ganga Fund. The process shall be as follows
- Where the unspent amount relates to an on-going project
- Reasons for not spending CSR funds to be specified in Board’s Report u/s 134(3), and
- Transfer the unspent balance to a dedicated account that can be used only for the purpose of CSR
- If this money is not used within 3 years, then within 30 days therefrom, transfer balance to Schedule VII fund.
- Where there is no on-going project
- Transfer spent balance within 6 months from the end of the financial year to Schedule VII fund.
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