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MCA attempts to make companies more compliant: Strict penalties for non-compliance

21 January 2019

Companies (Amendment) Ordinance, 2018 was promulgated by the President on November 2, 2018. The Ordinance was approved by the Houses of People on January 4, 2019 but could not be taken up for consideration in the Council of States. Since the Companies (Amendment) Ordinance, 2018 will cease to have effect from January 21, 2019 and considering it necessary to give continued effect to the provisions of the Companies (Amendment) Ordinance, 2018, the Companies (Amendment) Ordinance, 2018 has been replaced by the Companies (Amendment) Ordinance, 2019 on January 12, 2019.

Brief highlights of the Companies (Amendment) Ordinance, 2019 are:

Section No.

Title

Remarks

First Proviso to sec 2(41)

Application for Adopting a different financial year

Ordinance proposes to bring the subject matter to the Central Government (earlier power delegated to National Company Law Tribunal (NCLT)).

10A

Commencement of Business or exercise of Borrowing Powers (Newly Inserted)

The Company not to commence its business unless:

A declaration by the Directors certifying receipt of money from the subscribers is filed with the Registrar within 180 days of Incorporation and Verification of registered office has been filed.

12(9)

Registered Office of the Company (Newly Inserted)

Power to Registrar to remove name of Company from register of companies if the Company is not carrying any business.

First proviso to sec 14

Alteration of Articles

Application for Conversion from Public Company to a Private Company to be filed with Central Government (earlier power delegated to NCLT).

53(3)

Prohibition on issue of shares at Discount

Amendment in penal provisions for non-compliance of  section 53

64(2)

Notice to be given to Registrar for alteration of Share Capital

Amendment in penal provisions non-compliance of  section 64.

First Proviso to 77(1)

Duty to Register of Charges etc.

Extension of time for registration of charge by the Registrar on payment of additional fees.

86(2)

Punishment for Contravention (Newly Inserted)

In case a person wilfully furnishes false information required to be registered under section 77, he shall be liable under section 447.

87

Rectification by Central Government in Register of Charges

Extension of time by Central Government for filing in case of payment or satisfaction of Charge under exceptional circumstances.

90(9)

Register of Significant Beneficial Owner in a Company(Newly Inserted)

Appeal against Order of Tribunal to be made within a period of one year otherwise transfer of shares to IEPF Authority.

90(10)

Register of Significant Beneficial Owner in a Company

Penal provisions revised under this section to incorporate imprisonment for a term which may extend to a period of one year or with fine or both.

92(5)

Annual Return

Amendment in penal provisions for non-compliance of section 92.

102(5)

Statement to be annexed to Notice

Amendment in penal provisions for non-compliance of section 102.

105(3)

Proxies

Amendment in penal provisions for non-compliance of section 105.

117(2)

Resolution and Agreement to be Filed

Amendment in penal provisions for non-compliance of section 117.

121(3)

Report on Annual General Meetings

Amendment in penal provisions for non-compliance of section 121.

137(3)

Copy of Financial Statement to be Filed with Registrar

Amendment in penal provisions for non-compliance of section 137.

140(3)

Removal, Resignation of Auditor and giving of special notice.

Amendment in penal provisions for non- compliance of 140(2)

157(2)

Company to inform Director Identification Number of Registrar

Amendment in penal provisions for non- compliance of 157(1)

159

Punishment of Contravention

Amendment in penal provisions.

164(1)

Disqualification for Appointment of Director

Director to be disqualified if he has not complied with the provisions of sec 165(1) – Maximum no. of Companies in which person can be appointed as a Director.

165(6)

Number of Directorships

Amendment in penal provisions for non-compliance of the section 165(6)

197(7)

Overall Maximum Managerial Remuneration and Managerial Remuneration in Case of Absence or Inadequacy of Profits

Provision related to remuneration and stock option to Independent Director has been omitted.

203(5)

Appointment of Key Managerial Personnel

Amendment in penal provisions for contravention of this section 203.

238(3)

Registration of Offer of Schemes Involving Transfer of Shares. 

Amendment in penal provisions for contravention of this section 238.

248(1)

Power of Registrar to Remove Name of Company from Register of Companies. (Newly Inserted)

Powers of Registrar to remove name of Company in case of failure to comply with Sec 10A or 12(9)

Clause (b) of Section 441(1) and 441(6)

Compounding of certain offences

Amendment in provision related to compounding of certain offences

Section 446B

Lesser penalties for One Person Companies or small companies

Amendment in provision related to penalties for One Person Companies and Small Companies

Second Proviso to Section 447

Punishment for fraud

Punishment for fraud in certain cases increased from twenty lakh rupees to fifty lakh rupees

454 (3), (4) and (8)

Adjudication of Penalties

Amendment in provisions related to adjudication of Penalties

454A

Penal provision in case of continued default (Newly inserted)

New Section inserted to provide for penal provisions in case of continued default

The Companies (Amendment) Ordinance, 2019  can be accessed at http://mca.gov.in/Ministry/pdf/NotificationCAO2019_15012019.pdf

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