Companies (Amendment) Bill, 2020 key changes

CS Meenakshi Jayaraman
What are the key elements of the
Companies (Amendment) Bill, 2020?

Credits and Acknowledgments
Sundar Rajan S
2

3
Legends used in the Presentation
Act Companies Act, 2013
Bill Companies (Amendment) Bill, 2020
CFO Chief Financial Officer
CG Central Government
CSR Corporate Social Responsibility
KMP Key Managerial Personnel
MD Managing Director
OPC One Person Company
SEBI Securities and Exchange Board of India
Sec(s) Section(s)
WTD Whole-time director

Presentation Schema
4
Overview
Salient features of
the Bill
Decriminalisation of
offences
Provisions on Listed
Company
Timeline for rights
issue
Exemption under
Sec 117
Periodical financial
results
Corporate Social
Responsibility
Lesser penalties for
Certain companies

Overview
5
Companies Act, 2013 (Act) brought significant changes relating to disclosures to stakeholders,
accountability of directors, auditors and KMP, investor protection, corporate governance and an in-
house adjudication mechanism to adjudicate civil lapses without involving criminal courts
In order to facilitate greater ease of living to law abiding corporates, Company Law Committee (CLC)
was constituted to decriminalise some more provisions of the Act and to take other related measures
to provide further ease of living for corporates in the country
Based on the recommendations of the CLC and internal review by the Government, it is proposed to
amend various provisions of the Act with the main objective to decriminalise certain offences and
reduce penal obligations under the Act

Salient features of the Bill
6
To decriminalise certain offences under the Act which do not involve larger public interest
To empower CG to exclude, in consultation with SEBI, certain class of companies from the definition of "listed
company", mainly for listing of debt securities
To clarify the jurisdiction of trial court on the basis of place of commission of offence under Sec 452 of the Act for
wrongful withholding of property of a company by its officers or employees, as the case may be
To incorporate a new Chapter XXIA in the Act relating to Producer Companies, which was earlier part of the
Companies Act, 1956
To set up Benches of the National Company Law Appellate Tribunal
To make provisions for allowing payment of adequate remuneration to non-executive directors in case of
inadequacy of profits, by aligning the same with the provisions for remuneration to executive directors in such cases
To relax provisions relating to charging of higher additional fees for default on two or more occasions in submitting
or filing any document, fact or information as provided in Sec 403
To extend applicability of Sec 446B, relating to lesser penalties for small companies and OPCs, to all provisions of the
Act which attract monetary penalties and also extend the same benefit to Producer Companies and start-ups

7
Contd.
To exempt any class of persons from complying with the requirements of Sec 89 relating to
declaration of beneficial interest in shares
To exempt any class of foreign companies or companies incorporated outside India from the
provisions of Chapter XXII relating to companies incorporated outside India
To reduce timelines for applying for rights issues so as to speed up such issues under Sec 62
To extend exemptions to certain classes of non-banking financial companies and housing finance
companies from filing certain resolutions under Sec 117
To provide that the companies which have CSR spending obligation up to Rs. 50 lakhs shall not be
required to constitute the CSR Committee
To allow eligible companies under Sec 135 to set off any amount spent in excess of their CSR spending
obligation in a particular financial year towards such obligation in subsequent financial years
To provide for a window within which penalties shall not be levied for delay in filing annual returns
and financial statements in certain cases
To provide for specified classes of unlisted companies to prepare and file their periodical financial
results
To allow direct listing of securities by Indian companies in permissible foreign jurisdictions as per rules
to be prescribed

Decriminalisation of offences
8
The Bill proposes to decriminalise certain offences under the Act by removing imprisonment
provisions or relaxing / removing penalties
Section and description Existing (in the Act) Proposed (in the Bill)
Sec 8: Formation of
Companies with
Charitable Objects, etc
Sub-section (11): Default
in complying with
provisions of Sec 8
• Directors and every officer of
the company who is in default
are liable to,
Imprisonment - up to 3 years; or
Fine: Rs. 25,000 to 25 lakhs; or with
both
Directors and every officer of the company
who is in default are liable to,
Fine: Rs. 25,000 to 25 lakhs
Sec 16: Rectification of
Name of Company
Sub-section (3): Default in
complying with provisions
of Sec 16
• Company shall be punishable
with,
Fine: Rs. 1,000 for every continuing
day of default
• Every officer in default shall be
punishable with,
Fine: Rs. 5,000 to 1 lakh
• CG shall allot a new name to the
company in such manner as may be
prescribed and
• Registrar shall enter the new name in
the register of companies in place of the
old name and issue a fresh certificate of
incorporation with the new name,
which the company shall use thereafter
• However, it shall not prevent a company
from subsequently changing its name in
accordance with the provisions of Sec 13

Contd.
9
Sec 26: Matters to be
Stated in Prospectus
of Sec 26
• Every person who is knowingly a
party to the issue of such
prospectus shall be punishable
with,
both
• Every person who is knowingly a party
to the issue of such prospectus shall be
punishable with,
Sec 40: Securities to be
Dealt with in Stock
Exchanges
of Sec 40
punishable with,
Imprisonment - up to 1 year; or
both
punishable with,

Contd.
10
Sec 48: Variation of Shareholders'
Rights
complying with provisions of Sec 48
• Company shall be punishable with,
punishable with,
Imprisonment - up to 6 months; or
Fine: Rs. 25,000 to 5 lakhs; or with both
• *Omitted*
Sec 56: Transfer and Transmission
of Securities
complying with provisions of Sec 56
(1) to (5)
punishable with,
• Company and every officer
in default shall be liable to,
Penalty: Rs. 50,000
Sec 59: Rectification of Register of
Members
complying with Tribunal’s order
under Sec 59
Fine: Rs. 1 lakh to 5 lakhs
punishable with,
Fine: Rs. 1 lakh to 3 lakhs; or with both
• *Omitted*

11
Contd.
Sec 64: Notice to be Given to
Registrar for Alteration of
Share Capital
complying with provisions of
Sec 64
Company and every officer in default
shall be liable to lower of the
following:
• Rs. 1,000 for every continuing day
of default (or)
• Rs. 5 lakhs
• Company shall be liable to,
Fine: Rs. 500 for every continuing day
of default but not exceeding Rs. 5 lakhs
• Every officer in default shall be liable
to,
Fine: Rs. 500 for every continuing day
of default but not exceeding Rs. 1 lakh
Sec 66 (4): Order by Tribunal
on Reduction of Share Capital
Sec 66 (4)
with,
Fine: Rs. 5 lakhs to 25 lakhs
• *Omitted*
Sec 68: Power of Company to
Purchase its Own Securities
Sec 68
punishable with,
Fine: Rs. 1 lakh to 3 lakhs; or with
both
punishable with,

12
Contd.
Sec 71: Debentures
complying with Tribunal’s
order under Sec 71
• Every officer in default shall
punishable with,
Fine: Rs. 2 lakhs to 5 lakhs; or with
both
• *Omitted*
Sec 86: Punishment for
contravention
Chapter VI (Registration of
Charges)
with,
punishable with,
Fine: Rs. 25,000 to 1 lakh; or with
both
Penalty: Rs. 5 lakhs
to,
Penalty: Rs. 50,000
Sec 88: Register of Members,
etc.
maintaining registers or in the
prescribed manner
• Company and every officer in
default shall be punishable with,
Fine: Rs. 50,000 to 3 lakhs; and
Rs. 1,000 for everyday of continuing
default
to,
Penalty: Rs. 50,000

13
Contd.
Sec 89: Declaration in respect
of Beneficial Interest in any
Share
Sub-section (5): Failure to
make declaration under Sec 89
by specified persons in
specified manner
• Such person who failed to
make declaration shall be
punishable with,
Fine: up to Rs. 50,000; and
Rs. 1,000 for every day of
continuing default
• Such person who failed to make
declaration shall be liable to,
Penalty: Rs. 50,000; and
Rs. 200 for every day of continuing
default but not exceeding Rs. 5 lakhs
Sub-section (7): Failure to file
Form MGT-6 with Registrar
within 30 days of receipt of
declaration
• Company and every
officer in default shall be
punishable with,
Fine: Rs. 500 to 1000; and
continuing default
Penalty: Rs. 1,000 for every day of
continuing default but not exceeding
Rs. 5 lakhs
liable to,
Penalty: Rs. 1,000 for every day of
continuing default but not exceeding
Rs. 2 lakhs

14
Sec 90: Register of significant
beneficial owners in a
company
make declaration under Sec
90(1)
• Such person who failed to
make declaration shall be
punishable with,
Imprisonment: up to 1 year;
or
Fine: Rs. 1 lakh to Rs. 10
lakhs; and
continuing default; or with
both imprisonment and fine
• Such person who failed to make
declaration shall be liable to,
Rs. 1,000 for every day of continuing
maintain register in Form BEN-
3, file Form BEN-2 and take
necessary steps under Sec
90(4A)
• Company and every
officer in default shall be
punishable with,
Fine: Rs. 10 lakhs to 50 lakhs;
and
continuing default
Penalty: Rs. 1 lakh; and
liable to,
default but not exceeding Rs. 1 lakh
Contd.

15
Sec 92: Annual Return
filing Annual Return within
the specified period
• Company and every officer
in default shall be liable to,
Rs. 100 for every day of
continuing default but not
exceeding Rs. 5 lakhs
to,
default but not exceeding Rs. 50,000
Sub-section (6): Failure by
Company Secretary to certify
the Annual Return in
accordance with Sec 92
• Such Company Secretary
shall be punishable with,
• Such Company Secretary shall be
liable to,
Sec 105: Proxies
Sub-section (5): Proxy
invitations are issued at the
company's expense to any
member entitled to have a
notice of the meeting
Every officer of the company
who knowingly issues the
invitations as aforesaid or
wilfully authorises or permits
their issue shall be punishable
with,
Fine: up to Rs. 1 lakh
Every officer of the company who issues
the invitation as aforesaid or authorises
or permits their issue, shall be liable to,
Penalty: Rs. 50,000
Contd.

16
Sec 117: Resolutions and
Agreements to be Filed
filing resolution under Sec
117(1)
• Every officer in default including
liquidator shall be liable to,
Penalty - Rs. 50,000; and
• Every officer in default including
liquidator shall be liable to,
default but not exceeding Rs. 50,000
Sec 124: Unpaid Dividend
Account
of Sec 124
Fine: Rs. 5 lakhs to 25 lakhs
punishable with,
to,
Contd.

17
Sec 128: Books of
Account, etc., to be kept
by Company
of Sec 128
• MD, WTD in charge of finance, CFO
or any other person of a company
charged by the Board with the duty
of complying with the provisions of
this section shall be punishable
with,
Imprisonment: up to 1 year; or
Fine: Rs. 50,000 to 5 lakhs or with
both
• MD, WTD in charge of finance, CFO
or any other person of a company
charged by the Board with the duty
of complying with the provisions of
this section shall be punishable with,
Sec 134: Financial
Statement, Board’s
Report, etc.
of Sec 134
punishable with,
both
to,
Penalty - Rs. 50,000
Contd.

18
Section and
description
Existing (in the Act) Proposed (in the Bill)
Sec 135: Corporate
Social Responsibility
Sub-section (7):
Default in complying
with provisions of Sec
135(6) & (7)
punishable with,
Fine: Rs. 50,000 to 5 lakhs; or with both
Penalty: Twice the amount required to be transferred by
the company to the Fund specified in Schedule VII or the
Unspent Corporate Social Responsibility Account, as the
case may be, (or) Rs. 1 crore, “whichever is less”
• Every officer in default shall be liable to,
Penalty – 1/10th of the amount required to be
transferred by the company to the Fund specified in
Schedule VII or the Unspent Corporate Social
Responsibility Account, as the case may be, (or) Rs. 2
lakhs, “whichever is less”
Sec 137: Copy of
Financial Statement
to be filed with
Registrar
Sub-section (3):
Default in complying
with provisions of Sec
137
Penalty: Rs. 1,000 for every continuing
day of default but not exceeding Rs. 10
lakhs
Every officer in default shall be liable to,
Penalty: Rs. 1 lakh; and Rs. 100 for every
continuing day of default but not
Rs. 100 for every continuing day of default but not
Penalty: Rs. 10,000; and Rs. 100 for every continuing day
of default but not exceeding Rs. 50,000
Contd.

19
Sec 140: Removal,
Resignation of Auditor
and Giving of Special
Notice
file Form ADT-3 within 30
days from the date of
resignation
• Auditor or Audit firm shall be liable
to,
Penalty: Rs. 50,000 (or) amount equal
to the remuneration of the auditor,
“whichever is less”; and
Rs. 500 for every continuing day of
• Auditor or Audit firm shall be liable
to,
Penalty: Rs. 50,000 (or) amount equal
to the remuneration of the auditor,
“whichever is less”; and
Rs. 500 for every continuing day of
Sec 143: Powers and
Duties of Auditors and
Auditing Standards
Sub-section (15): Default
in complying with
provisions of Sec 143(12)
[Fraud Reporting]
• Auditor, cost accountant or
company secretary in practice shall
be punishable with,
• Auditor, cost accountant or company
secretary in practice shall be liable
to,
Penalty: Rs. 5 lakhs (in case of listed
Company); or
Rs. 1 lakh (in case of any other
Company)
Contd.

20
Contravention
of Sec 139 to 146
punishable with,
both
punishable with,
Sub-section (2) • Contravention of Sec 139, 143, 144
and 145 by an auditor of the
Company
• Contravention of Sec 139, 144 and
145 by an auditor of the Company
Sec 165: Number of
Directorships
Sub-section (6):
Contravention of limits of
directorships as given in
Sec 165(1)
• Such director shall be liable to,
Penalty: Rs. 5,000 for every
continuing day of default
Penalty: Rs. 2,000 for every continuing
day of default but not exceeding Rs. 2
lakhs
Contd.

21
Sec 167: Vacation of Office of
Director
complying with provisions of Sec
167(1)
• Such director shall be
punishable with,
Fine: Rs. 1 lakh to 5 lakhs; or with
both
• Such director shall be punishable with,
Sec 172: Punishment
Contravening the provisions of
Chapter XI (Appointment and
Qualifications of Directors)
default shall be punishable with,
Penalty: Rs. 50,000; and Rs. 500 for every continuing
day of default but not exceeding Rs. 3 lakhs
Penalty: Rs. 50,000; and Rs. 500 for every continuing
day of default but not exceeding Rs. 1 lakh
Sec 178: Nomination and
Remuneration Committee and
Stakeholders Relationship
Committee
Sub-section (8): Contravening the
provisions of Sec 177 and 178
with,
punishable with,
both
Penalty: Rs. 1 lakh
Contd.

22
Sec 184: Disclosure of Interest by
Director
provisions of Sec 184
• Such director shall be punishable with,
Fine: up to Rs. 1 lakh; or with both
Penalty: Rs. 1 lakh
Sec 187: Investments of Company
to be Held in its Own Name
• Every officer in default shall be punishable
with,
Fine: Rs. 25,000 to 1 lakh; or with both
Penalty: Rs. 50,000
Sec 188: Related Party
Transactions
• Such director or any other employee of
the Company shall be punishable with,
Imprisonment - up to 1 year (in case of listed
Company); or
Fine: Rs. 25,000 to 5 lakhs (in case of any
Company); or with both (in case of listed
Company)
• Such director or any other employee of
the Company shall be liable to,
Penalty: Rs. 25 lakhs (in case of listed
Company); or
Rs. 5 lakhs (in case of any other Company)
Contd.

23
Sec 204: Secretarial Audit for
Bigger Companies
• Company, every officer of the company or
the company secretary in practice who is
in default shall be punishable with,
• Company, every officer of the company
or the company secretary in practice
who is in default shall be liable to,
Sec 232: Merger and
Amalgamation of Companies
• Company (transferor and transferee) shall
be punishable with,
• Every officer in default (transferor and
transferee) shall be punishable with,
Fine: Rs. 1 lakh to 3 lakhs; or with both
• Failure to comply with Sec 232(5) by
Company and every officer in default
shall be liable to,
Penalty: Rs. 20,000; and Rs. 1,000 for
every continuing day of default but not
Sec 242: Powers of Tribunal
provisions of Sec 242 (order given
by Tribunal)
with,
Fine: Rs. 25,000 to 1 lakh; or with both
punishable with,
Contd.

24
Sec 243: Consequence of
Termination or Modification of
Certain Agreements
with,
Fine: up to Rs. 5 lakhs; or with both
punishable with,
Fine: up to Rs. 5 lakhs
Sec 247: Valuation by Registered
Valuers
• Valuer shall be punishable with,
• Valuer shall be liable to,
Penalty: Rs. 50,000
Sec 342: Prosecution of
Delinquent Officers and Members
of Company
[Assistance by liquidator in
connection with the prosecution]
• Liquidator shall be liable to,
• *Omitted*
Contd.

25
Sec 347: Disposal of Books and
Papers of Company
• Such person shall be punishable with,
Fine: up to Rs. 50,000; or with both
• Such person shall be punishable with,
Fine: up to Rs. 50,000
Sec 348: Information as to
Pending Liquidations
• Company Liquidator shall be punishable
with,
Fine: Rs. 5,000 for every continuing day of
default
• Company Liquidator, who is an
insolvency professional registered under
the Insolvency and Bankruptcy Code,
2016 shall be deemed to be,
• a contravention of the provisions of the
said Code, and the rules and regulations
made thereunder for the purposes of
proceedings under Chapter VI of Part IV
of that Code
Sub-section (7): Wilful default in
causing the statement under Sec
348(1) audited by a person who is
not qualified to act as an auditor
of the company
• Company Liquidator shall be punishable
with,
Fine: up to Rs. 1 lakh; or with both
• *Omitted*
Contd.

26
Contravention
Contravening the provisions
of Chapter XXII (Companies
incorporated outside India)
punishable with,
both
• Every officer in default shall be punishable with,
Sec 405: Power of Central
Government to Direct
Companies to Furnish
Information or Statistics
Sub-section (4):
Contravening the provisions
of Sec 405
with,
Fine: up to Rs. 25,000
punishable with,
both
• Company and every officer in default shall be liable to,
Penalty: Rs. 20,000; and Rs. 1,000 for every continuing day
Sec 450: Punishment Where
No Specific Penalty or
Punishment is Provided
default or any other person shall
be punishable with,
Fine: up to Rs. 10,000; and Rs. 1,000
for every continuing day of default
• Every officer in default or any other person shall be
liable to,
of default but not exceeding Rs. 50,000
Contd.

Definition of Listed Company – Sec 2(52)
27
Such class of companies, which have listed or intend to list such class of securities, as may
be prescribed in consultation with SEBI, shall not be considered as listed companies
Insertion of proviso which states that,
The above insertion is proposed mainly for listing of debt securities
Listing securities on stock exchanges in
permissible foreign jurisdictions
Allowing a class of public companies to list certain class of securities on stock exchanges in permissible
foreign jurisdictions or such other jurisdictions, as may be provided by rules – Sec 23(3)
CG may, by notification, exempt any class or classes of public companies referred to in Sec 23(3) from
any of the provisions of Chapter III, Chapter IV, Sec 89, 90 or 127 of the Act – Sec 23(4)

Reducing the timeline for rights issue – Sec 62
28
Insertion of the term “or such lesser number of days as may be prescribed”
for duration of offer period
This enables even public Companies to expedite the completion of rights
issue process
Exemption under Sec 89
CG may by notification, exempt any class or classes of persons from
complying with any of the requirements of Sec 89, except sub-section (10),
if it is considered necessary to grant such exemption in the public
interest and
any such exemption may be granted either unconditionally or subject to
such conditions as may be specified in the notification

Filing resolutions under Sec 117
29
Second proviso to Sec 117(3)(g) provides exemption to banking Company from filing Form
MGT-14 with respect to resolution passed to grant loans, or give guarantee or provide
security in respect of loans under Sec 179(3)(f)
This exemption is now proposed to be extended to Non-Banking Finance Companies and
Housing Finance Companies
Periodical financial results – Sec 129A
CG may, require such class or classes of unlisted companies, as may be prescribed,
 to prepare the financial results of the company on such periodical basis
 to obtain approval of the Board of Directors and complete audit or limited review of such
periodical financial results
 file a copy with the Registrar within a period of 30 days of completion of the relevant period

Corporate Social Responsibility – Sec 135
30
If the company spends in excess of the required CSR spending, such company may set off such excess
amount against the requirement to spend under Sec 135(5) for such number of succeeding financial
years and in such manner, as may be prescribed
Where the amount to be spent under Sec 135(5) does not exceed Rs. 50 lakhs, the requirement for
constitution of the CSR Committee shall not be applicable and the functions of such Committee
provided under sec 135 shall, in such cases, be discharged by the Board of Directors of such company

Remuneration in case of inadequate
profits – Sec 197
31
If a company fails to make profits or makes inadequate profits in a financial year, any non-
executive director of such company, including an independent director, shall be paid
remuneration in accordance with Schedule V of the Act
Independent directors – Sec 149
Independent director may receive remuneration, exclusive if a company has no profits or
inadequate profits, exclusive of any fees payable under Sec 197(5), in accordance with the
provisions of Schedule V
Sec 197(5) deals with sitting fee of directors for attending meetings

32
Lesser penalties for Certain companies –
Sec 446B
which shall not be more than one-half of the penalty specified in such provisions subject
to a maximum of Rs. 2 lakhs in case of a company and Rs. 1 lakh in case of an officer who
is in default or any other person, as the case may be
then such company, its officer in default or any other person, as the case may be, shall be
liable to a penalty
If penalty is payable for non-compliance of any of the provisions of the Act by an OPC,
small company, start-up company or Producer Company, or by any of its officer in default,
or any other person in respect of such company,

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