Company administration is the responsibility of the Ministry of Corporate Affairs (MCA) of the Govt. of India. The MCA introduces amendments to the Act (recommended by its various committees) which are then cleared by the Parliament via the Amendment Bill or Ordinance route before coming into force as law. The Companies Act 2013 came into force on 12th Sept 2013 as an Act of the Parliament of India; being the successor to but not entirely superseding the Companies Act 1956. It concerns itself with all aspects of the functioning of a company from its formation to its dissolution.
Amendments to the Companies Act 2013
Various amendments enacted to the Companies Act 2013 are listed below along with an overview of significant changes.
1) The Companies Amendment Act of 2015
- This act is effective from 26th May 2015.
- Minimum paid-up share capital requirements of private and public companies done away with.
- Use of the common seal of a company (for stamping documents like share/stock certificates and power of attorney for the execution of deeds) becomes optional.
- Commencement of Business certificate no longer required.
- Punitive measures introduced for accepting deposits in a manner not prescribed in the Act.
- Form MGT-14(details of resolutions and agreements of the board) no longer available for public inspection on the MCA website.
- No declaration of dividend permitted unless previous year(s) losses/depreciation are deducted from current fiscal year profits.
- In case of detection of fraud committed by company employees, reporting procedure and period for reporting said fraud after detection by auditors are now clearly defined.
- Bail restrictions in case of an investigation by Serious Fraud Investigation Office shall now apply only to fraud committed under section 44.
2) The Companies Amendment Act of 2017
There are various effective dates depending upon the section of the act.
- The period for reserving a name (when the registrar receives an application for the formation of a new company) is now 20 days from the date of approval instead of 60 days from the date of application.
- The period for establishing a registered office (for a newly incorporated company) or shifting to a new office is increased to 30 days from 15.
- In a new addition, in case the number of members of a company falls below 7 for a public company and 2 for a private company and the company continues to do business with these reduced numbers for a period exceeding 6 months then these reduced members will be liable for debts incurred during this period.
- The period of the reopening of the book of accounts is now specified and limited to 8 years preceding the current fiscal year.
- Chief Executive Officer will now mandatorily sign the financial statements whether appointed as director or not.
- Provisions for evaluation of Board and Directors streamlined.
- Amendments made to Corporate Social Responsibility section 135 to bring greater clarity to existing provisions.
- Listed companies will now have to provide separate audited accounts of each of its subsidiaries.
- During incorporation, the company’s self-declaration’ are now sufficient instead of affidavits thus reducing compliance burden.
- One person companies and small companies may now be required to file only an abridged form of annual return.
- Directors are now allowed to participate through video conferencing if a quorum is established via the physical participation of other Directors.
3) The Companies Amendment Ordinance 2018
- It is effective from 02-Nov-2018. A re-categorization of offenses and streamlining of applicable fines/punishments were undertaken in this ordinance. Many offenses that would earlier have been punishable by fines and imprisonment would not only attract a penalty. However, the penalties would now be stiffer in case of repeated offenses.
- There were also other changes like increasing the pecuniary limits of the Regional Directors (RD) to which they could compound offenses from 5 lakhs to 25 lakhs. This was mainly done to ease the burden on the National Company Law Appellate Tribunal (NCLAT) so that smaller matters could be dealt with at the RD level instead of being forwarded to the NCLT.
- There were also some corporate governance-related reforms such as disqualification of directors in case such directors are holding several directorships beyond the permissible limits.
4) The Companies Amendment Act of 2019
The amendments that were included in the Ordinance of 2018 were now passed as an Act of Parliament. Contents of this Act are identical to the Ordinance of 2018.
5) The Companies Amendment Bill 2020 (proposed)
Following amendments are proposed:
- The Govt of India with inputs from SEBI will now be able to exclude some categories of companies from what is defined to be ‘listed’ company. It is understood that this will apply to a company whose shares are not listed but debentures are on stock exchanges.
- Companies with Corporate Social Responsibility obligations up to 50 Lakhs will not be required to set up a CSR Committee. Also, companies spending over their CSR obligation in a particular financial year will be permitted to reduce their CSR spending accordingly in upcoming fiscals.
- A window period to be granted in case of delay in filing annual returns and financial statements in which no penalties will be levied.
- A separate chapter on ‘Producer’ companies (a legally recognized body of farmers) to be included.
- Section 446B provides lesser penalties for one-person companies and small companies. It is proposed to extend the applicability of 446B so that it covers all monetary penalties under the act and also cover producer companies and start-ups under its umbrella.
- Payment for non-executive directors in case of inadequate profits proposed to be similar to executive directors in such cases.
- Section 403 of the act deals with the fees to be paid to the registrar in case of failure to submit, record, register or file any document as prescribed. It is proposed to provide relief in the case when higher fees are required to be submitted in case of 2 or more such failures.
- Section 89 of the act deals with the concept of a beneficial interest in the shares of a company and recording/reporting the same.
- Exemptions for complying with Section 89 for any class of persons is proposed.
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