Companies (Amendment) Bill 2019

The Companies (Amendment) Bill, 2019 seeks to amend the Companies Act, 2013. The finance minister said that the amendment will enhance accountability and ensure better enforcement to strengthen corporate governance norms in the corporate sector. According to the Union Minister, the bill will keep a check on bogus companies and will promote ‘ease of doing business’.

The key features of the amendment are:

• The bill adds a proviso to Section 2 of the Companies Act, 2019 which allows subsidiaries or associates of foreign companies that follow a different financial year outside India to follow any period as its financial year.
• Section 10A makes it mandatory to file a declaration with the Registrar within 180 days of the incorporation that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making such declaration. Non-filing will amount to non-commencement of business which will lead to the removal of the company from the register of companies. This will help to keep a check on ‘shell companies’.
• Another provision that has been added to control shell companies is the proposed sub-section 9 which is to be added to Section 12. This provision enables the Registrar to opt for physical verification of the company’s registered office if the Registrar has sufficient and reasonable cause to believe that the company is not carrying on any operation or business.
• Changes are to be made to Section 135 to carry forward the unspent Corporate Social Responsibility Amount, to a special account to be spent within three financial years and transfer it thereafter to the funds specified in Schedule VII.
• A new clause has been inserted under Section 164 which provides that a violation of Section 165(1) shall be a ground for the disqualification of the directors of the company, if they breach the limits of maximum directorship allowed in the section.
• The Bill proposes to amend sixteen sections of the act to modify punishments provided under those sections in order to lessen the burden on special courts.
• The amendment to Section 241 seeks to empower the Central Government to move a matter to National Company Law Tribunal (NCLT) on several grounds.
• Under the proposed clause (d) and (e) which are to be added to sub-section (1) of Section 248, the Registrar shall send a notice to such companies and its directors to inform them of the intention to remove the name of the company from the register of companies when Section 10A is not complied with and the Registrar learns that the company is not carrying on any operations or business upon physical verification.
• The pecuniary limit on the Regional Directors (RD) to compound offences under Section 441 of the Act is proposed to be increased to Rs. 25 lakhs.

-India Legal Bureau