The Companies Amendment Act of 2020 (hereinafter referred to as the ‘Amendment Act’) brought about several significant changes to the Companies Act, expanding the scope of various sections. In this article, we will explore some significant amendments made to the Companies Act.
Amendment on Section 62 of the Companies Act (Section 11 of the Amendment Act)
Amendment to Section 62, Subsection 1, Clause (a), Sub-clause (i)
The amendment to Section 62 of the Companies Act focuses on the offer made by notice, specifying the number of shares to be issued. Previously, the offer had to be made within 15 days or less, but not exceeding 30 days.
AFTER AMENDMENT: The amendment includes the phrase “or such lesser days may be prescribed” after “less than 15 days.” This provides flexibility in determining the specific timeframe for making the offer.
Amendment to Section 82 of the Company’s Act (Sec 18 of the Amendment Act)
Amendments have been made to Section 82, specifically Subsection 5, which addresses the consequences of failure to submit declarations without reasonable cause. Previously, this failure resulted in a compensation of fifty thousand rupees, with an additional fine of 1000 rupees per day for continuous failure.
AFTER AMENDMENT: The amendment introduces a revised penalty structure. In case of failure to submit declarations, a fine of 200 rupees will be imposed per day after the first day of failure. This penalty can extend up to ₹ 5 lakh.
Another amendment under Section 82, Subsection 7, deals with failing to file returns after the due date. Directors and company members were previously liable to pay a fee of 500 rupees, with an increased amount of 1000 rupees for continuous failure.
AFTER AMENDMENT: In case of failure to file returns, directors and members will be subject to a penalty of 1000 rupees per day. In the case of continuous failure, the penalty fee can extend up to ₹ 5 lakh. Failure to pay the required amount by a member incurs a penalty fee of t₹ 2 lakh.
Amendment on Section 117 of the Companies Act (Sec 22 of the Amendment Act)
Section 117 of the Companies Act pertains to the consequences of failing to file documents or resolutions within the due date. Previously, this failure resulted in compensation of 1000 rupees per instance, with penalties extending up to 25 lakh rupees.
AFTER AMENDMENT: The amendment introduces a revised penalty structure. In case of failure to file documents or resolutions, a penalty of 10,000 rupees will be imposed. For continuous failure, an additional penalty of 100 rupees per day will be charged, with the penalty amount capped at 1 lakh rupees. In the case of defaults caused by individuals or members, the penalty amount is 10,000 rupees, with an additional penalty of 100 rupees per day for continuous failure, up to a maximum of 50,000 rupees.
Amendment on Section 137 of the Companies Act (Sec 28 of the Amendment Act)
The amendment to Section 137 of the Companies Act pertains to the penalty structure for non-compliance. Previously, a penalty of 10,000 rupees per day was imposed, which could extend to 5 lakh rupees.
AFTER AMENDMENT: The amendment replaces the previous penalty structure with a penalty of 1000 rupees. If the failure continues, a penalty of 100 rupees per day will be charged. For further continuous failure, the penalty amount increases to 2 lakh rupees.
Amendment on Section 393 of the Company’s Act (Sec 55 of the Amendment Act)
This amendment introduces a new section, Section 393A, which follows Section 393 of the principal act. Section 393A deals with the central government’s power to exempt any class of foreign companies, whether incorporated in India or formed elsewhere.
Amendment on Section 452 of the Companies Act (Sec 63 of the Amendment Act)
An additional proviso has been inserted in Section 452, Subsection 2. According to this proviso, a person cannot be imprisoned for wrongful possession of a dwelling if the company has not paid the employee the basic allowances, provident fund (PF), and other allowances. This provision also addresses compensation or liability under the Workmen’s Compensation Act 1923.
The amendment under Section 454 of the Companies Act (Section 65 of the Amendment Act)
A new proviso has been inserted after Section 454, Subsection 3 of the Companies Act. This proviso states that in the case of non-compliance with the provisions mentioned in Section 97, Subsection 2, or Subsections 1 and 2 of Section 137, no penalty will be levied if the issue is rectified within 30 days.
Conclusion
Every organization should thoroughly review the Companies Amendment Act of 2020, as it provides significant scope for companies to rectify their non-compliance with specific provisions. The amendments have reduced penalties and allowed companies to address any non-compliance issues effectively.
FAQs
Q1: What is the Companies Amendment Act of 2020?
The Companies Amendment Act of 2020 refers to the legislative changes made to the Companies Act, aiming to enhance and modify various provisions.
Q2: What are some key amendments introduced by the Companies Amendment Act of 2020?
Some key amendments include changes to Sections 62, 82, 117, 137, 393, 452, and 454 of the Companies Act.
Q3: How have the penalties been revised after the amendments?
The penalties have been revised to provide a more structured and proportional approach. The amendments have reduced penalties in some instances while introducing additional penalties for continuous non-compliance.
Q4: What is the significance of the Companies Amendment Act of 2020 for organizations?
The Companies Amendment Act of 2020 allows organisations to rectify non-compliance issues and reduce penalties. It is crucial for organizations to thoroughly understand the amendments and ensure compliance with the revised provisions.
