9 Major Changes in Companies (Amendment) Bill, 2020

A bill was passed by the Lok Sabha for further amendment of 48 Sections of the Companies (Amendment) Bill, 2020 by decriminalizing various non-compoundable offences in case of defaults, in any case, not including frauds, excluding detainment for different offenses which were viewed as procedural and technical in nature.

"There are 48 sections we have altered to decriminalize them and 17 sections have been amend to improve the ease of doing business" says the Minister for Corporate Affairs, Ms. Nirmala Sitharaman

Talking on the bill, Sitharaman further said decriminalization of different punitive provisions under the organizations law will likewise help little organizations by decreasing the litigation burden on them. Sitharaman said there are presently around 124 penal proviisons compared with 134 of every 2013

1) NCLT

The bill removes the penalty, imprisonment for 9 offenses which relate to non-compliance with orders of the national company law tribunal (NCLT), and reduces the amount of fine payable in certain cases. These include matters relating to winding-up of companies, default in publication of NCLT order relating to reduction of share capital, rectification of registers of security holders, variation of rights of shareholders and payment of interest and redemption of debentures.

2) Corporate Social Responsibility

Provisions under the bill allowed companies to roll over excess corporate social responsibility (CSR) spends to succeeding years and exempted companies with a CSR obligation below Rs 50 lakh from the need to set up a CSR committee.

3) Direct Listing of Securities in Foreign Jurisdictions

The bill also included enabling provisions for the direct listing of securities of Indian public companies in permissible foreign jurisdictions and empowered the government, in consultation with the Securities and Exchange Board of India, to exempt private companies issuing specified classes of securities on exchanges from the definition of a listed company.

4) Reduce Penalty for Offence, removes imprisonment

it eliminates the penalty for specific offenses like, For instance, it eliminates the detainment of three years material to an organization for buying back its shares without following the Act.

5) Remuneration to Independent directors

The Company Act makes special provisions for payment of remuneration to executive directors of an organization, if the organization has lacking or no benefits in a year. The Bill stretches out this arrangement to non-executive directors, including independent directors.

6) Exemptions from filing resolutions to NBFCs

The Act expects organizations to file certain goals with the ROC, barring banking organizations are absolved from recording goals went to give credits, or to give certifications or security to an advance. This exclusion has been reached out to non-banking monetary organizations and housing finance companies.

7) Producer Companies

Under the 2013 Act, certain provisions from the Companies Act, 1956 continue to apply to producer companies. These include provisions on their membership, the conduct of meetings, and maintenance of accounts. The Bill removes these provisions and adds a new chapter in the Act with similar provisions on producer companies.

8) Financial Results Filing & Corporate Governance

Specified class of unlisted companies will now have to prepare and file their financial results periodically and also complete the audit or review of such results.

• Also, the Bill provides for a window within which the penalties shall not be levied for delay in filing of annual returns.
• This aims to improve corporate governance as it will bring more transparency into affairs of closely held companies which are used by major shareholders of large public interest companies to divert funds through transactions that are not on an arm’s length basis.

9) Benches of NCLAT

The Bill seeks to establish benches of the National Company Law Appellate Tribunal in order to ease their burden and decrease the pendency of cases.