Key Points of Companies (Amendment) Ordinance 2018

In order to strengthen the regulatory framework, The Government published Companies amendment Ordinance 2018 for amendment to the Companies Act, 2013. The key points have been discussed hereunder:

Central Govt  power to change the financial Year

Currently if Companies are required to change the Financial Year, they have to file an application with the NCLT. Now, the Central Govt. has the power to entertain the applications from a company, being a holding/ subsidiary/ associate company of a company incorporated outside India, to follow a different financial year for the purpose
of consolidation of its accounts outside India.

Amendment of section 2 – Financial year of a company

Reduced penalty for small companies and one person Companies

The penalty for small companies and one person companies has been reduced to half of that applicable to normal companies.

Shifting of jurisdiction of 16 types of corporate offences

Shifting of jurisdiction of 16 types of corporate offences from the special courts to in-house adjudication, which is expected to reduce the case load of Special Courts by over 60%,thereby  enabling them to concentrate on serious corporate offences.  With this amendment the scope of in-house adjudication has gone up from 18 Sections at present to 34 Sections of the Act.

Publication of the orders on the website.

Instituting a transparent and technology driven in-house adjudication mechanism on an online platform and publication of the orders on the website.

 Receipt of Share Money and Verification of Address must to obtain certificate of commencement

Companies with share capital, which are incorporated after date on which this ordinance comes into force, can’t start the business unless a declaration is filed by them with the Registrar of Companies that every subscriber has paid the value of the shares and its registered office has been verified. Any failure in filing such declaration would be one of
the grounds to strike off the name of the companies

Insertion of new section 10A– Restrictions on commencement or exercise borrowings . requirement to file a declaration by director regarding payment of subscribed share capital and filing with the Registrar a verification of its registered office

Physical verification of registered office

A Registrar may physically verify the registered office of the company and if any default is found in complying with the requirement of maintenance of registered office, he may initiate action for the removal of name of the company from the register of companies.

Amendment of section 12 – ROC Power to cause physical verification of the registered office of the company.

Time for registration and modification of charges

The Ordinance reduces the maximum time period for registration and modification of charge with the ROC from existing 300 days to 60 days from date of creation/modification.

Increase in penalty for not appointing Key Managerial Personnel

It is mandatory for specified companies to appoint Key Managerial Personnel (i.e., CEO, CFO and CS) under Section 203. Currently, any failure in appointing the KMP would result in levy of penalty of Rs. 1 Lakh to Rs. 5 Lakhs on the company and up to Rs. 50,000 on every officer-in-default.

The Ordinance now levies an absolute penalty of Rs. 5 lakhs on the company and penalty of Rs. 50,000 on every Officer-in-default. In case of continuous default there would be an additional penalty of Rs. 1,000 per day for each day subject to maximum of Rs. 5 lakh.

Removal of imprisonment provision for certain defaults

As per existing provisions, every officer-in-default shall be prosecuted with an imprisonment for term of 6 months and penalty if company fails to file the annual return before the specified period. The Ordinance removes the provisions of imprisonment of an officer-in-default in case of non-compliance of Section 92.
Similarly, the Ordinance removes the imprisonment provision against all directors of the company in default for non-filing of copy of financials to ROC.

Penalty for failure to issue statement along with notice about voting by proxy

Section 105(2) requires every company (with share capital), or where Article of Association provides for voting by proxy, to provide a statement along with notice for calling general meeting that a member is entitled to attend and vote or to appoint a proxy.

Any failure to comply with this requirement results in levy of penalty of up to Rs. 5,000. The Ordinance levies the absolute penalty of Rs. 5,000 for such non-compliance

Penalty on non-filing of resolutions and agreements to ROC

The Ordinance introduces a penalty of Rs. 500 per day in case of continuing failure of non-filing of resolutions or agreements as specified under Section 117(3) in addition to penalty of Rs. 1 lakh to Rs. 5 lakh against company and Rs. 50, 000 against every officerin-default including liquidator of the company.

Declogging the NCLT

by:

a. enlarging the pecuniary jurisdiction of Regional Director  by enhancing the  limit up to Rs. 25 Lakh as against earlier limit of Rs. 5 Lakh under Section 441 of the Act;

b. vesting in the Central Government the power to approve the alteration in the financial year of a company under section 2(41); and

c. vesting the Central Government the power to approve cases of conversion of public companies into private companies.

Other Amendments

Amendment of section 14 – alteration of articles having the effect of conversion of a public company into a private company shall not be valid unless it is approved by an order of the Central Government.

Amendment of section 53 – Issue of shares at discount. Penalty prescribed

Amendment of section 64 Alteration of Share Capital. Penalty prescribed

Amendment of section 77 – Registration of charges with additional fees

Amendment of section 86 – Punishment for non compliance of charge provisions

Substitution of new   section for section 87. Rectification by Central Government in Register of charges.

Amendment of section 90 – Investigation of Beneficial ownership

Amendment of section 92 – Annual Returns. Provisions for prosecution removed

Amendment of section 102 – Statement to be Annexed to Notice. Penalty provisions amended

Amendment of section 105 – Proxies Punishment substituted by “Penalty”

Amendment of section 117 – resolutions and Agreements to be filed. Punishment substituted by “Penalty”

Amendment of section 121 – Report on Annual general Meeting.  Punishment substituted by “Penalty”

Amendment of section 137 – Copy of Financial Statements to be filed with ROC.  Punishment substituted by “Penalty”

Amendment of section 140 – removal, resignation of auditor. Punishment substituted by “Penalty”

Amendment of section 157

Substitution of section 159

Amendment of section 164

Amendment of section 165

Amendment of section 191

Amendment of section 197

Amendment of section 203

Amendment of section 238

Amendment of section 248

Amendment of section 441

Amendment of section 446B

Amendment of section 447

Amendment of section 454

Insertion of section 454A Penalty for repeated default