Amendments and Recent Developments in Companies Act

Companies Amendment Act 2019
Issue of Dematerialized Shares
Under the 2013 Act, certain classes of public companies can issue shares only in demat form. The Bill states this may be prescribed for other classes of unlisted companies as well
Recategorisation of Offences
Under the 2013 Act, there are 81 compoundable offences that carry punishments of a fine and/or prison terms. These offences are heard by courts. The Bill makes 16 of these offences civil defaults, where government-appointed adjudicating officers may levy penalties. Some of these offences are the issuance of shares at a discount, and the failure to file annual returns. The Bill also amends penalties for some other offences.
Corporate Social Responsibility
As of now, companies that are required to budget for CSR must disclose in their annual reports the reasons why they were unable to fully spend these funds. Now, any unspent annual CSR funds must be transferred to one of the funds under Schedule 7 of the Act (for example, the Prime Minister's Relief Fund) within six months of the financial year.
Debarrment of Auditor- corrected
Under the Act, the National Financial Reporting Authority can debar a member or firm from practising as a Chartered Accountant for six months to 10 years in case of proven misconduct. The Bill amends this punishment to provide for debarment from appointment as an auditor or internal auditor of a company, or performing a company's valuation, for the same period
Registration of Charges
Under the Act, companies must register charges (mortgages, etc.) on their property within 30 days of creation of the charge, extendable up to 300 days with permission from the Registrar of Companies. The Bill changes the deadline to 60 days (extendable by 60 days)
Change in Approving Authority
Under the Act, change in period of financial year for a company associated with a foreign company, has to be approved by the National Company Law Tribunal (NCLT). Any alteration in the incorporation document of a public company which has the effect of converting it to a private company, too, has to be approved by the NCLT. Under the Bill, these powers have been transferred to the central government
Mismanagement -Bar on Holding Office

Under the existing Act, the central government or certain shareholders can apply to the NCLT for relief against mismanagement of the affairs of the company. The Bill states that in such a complaint, the government may also make a case against an officer of the company on the ground that he is not fit to hold office in the company, for reasons such as fraud or negligence. If the NCLT passes an order against the officer, he will not be eligible to hold office in any company for five years.

Highlights of *Companies (Amendment) Ordinance 2019*
1. *Commencement Certificate* is mandatory now to be obtain within 6 months of Incorporation without which, it can not comment its business activity or borrow money.
2. The ROC can strike off a company if the address of Regd Office is *bogus* or incomplete/improper  address.
3. Conversion of public Ltd to Pvt Ltd matters shifted from NCLT to Regional Directorate.
4. Company cannot issue shares at discount, - heavy penalty imposed on violation.
5. Alteration of Authorised Capital to be intimated within 30 days, default - penalty 1000 every day or 5 Lac whichever is less.
6. Creation of charge filing with ROC-  time limit *reduced* from 300 days to 60 days.
7. Wrong statement/ information in filing Charge forms with ROC may lead to misrepresentation and *jail*
8. *Annual Return* should be filed within 60 days from AGM, failure to this, penalty of 100 per day to Company + directors max 5 Lakh apart from ROC delay charges is applicable.
9. Penalty of 5 lakh to Company secretary certifying wrong Annual Return.
10. Explanatory statement to be given with Notice of General Meeting must contain all details as required by Law, if no detail/short detail/misleading - penalty for Company + Directors + KMP - 50K
11. *filing of Resolutions* with ROC- delay will be *very costly* now. Penalty for defaulter increased substantially. 500 every day max 25 Lakh
12.Filing of Balance sheet with ROC within time limit- failure is costly for Company + Directors both. Penalty of 100 per day + 1 lakh to Company + Director each.
13. *Resignation of Auditor* must be filed by the resigning Auditor within 30 days, failure to which the resigning Auditor is liable for penalty of 50,000 + 500 per day.
14. A director can not become director in  morethan 20 companies. If he continues, he becomes disqualified now.
15. Appointment of CS on payroll (Pvt Co having paid-up capital 5 cr & above) is mandatory. Default is now very costly- penalty increased substantially.
16. ROC may strike off a company if subscribers have not paid initial share capital after incorporation of a Company within 6 months-FAR.
17. The Indian subsidiary or associate or holding company of the foreign company may be allowed to follow any period as its financial period on an application made by such company if it is required for consolidation of its financials with the foreign company. Also the such period may or may not be one year.

Registered office of a company


In December 2012, the ministry of corporate affairs (MCA) issued an advertisement announcing tightening of rules regarding address proofs of registered offices. The advertisements asked corporates and professionals to provide details of registered offices, whether it is owned or leased and proof of registered office address has been made mandatory. The ministry gave 180 days to rectify mistakes and cautioned corporates and professionals to be more vigilant and careful in certification and verification while providing the details in the forms to avoid penal action.

Therefore, Form 18 requires a certification from a professional. Goldmine’s Form 18 was signed by a chartered accountant by name Sudhanshu Bansal, who has the membership number 500616. “I further certify that I have personally visited the new address, verified it and I am of the opinion that the premises are indeed at the disposal of the applicant company,” his certification for goldmine’s new address says. 

Now, it is open for this professional to argue that on the date of certification there was an office. If it was wrapped up subsequently or wiped off the face of the earth, how can she be held responsible? Fair point. Does that absolve the Ministry of its responsibility to keep its turf clean and prevent it from becoming a money laundering paradise? 

Vide rules notified in 2014, MCA has brought in a new form INC 22, the requirements of this form are even more elaborate. It won’t take utility bills older than two months for address proof, it requires an authorization from the owner of premises to use it as the registered office. 

1) the registered document of the title of the premises of the registered office in the name of the company; or

2) the notarized copy of lease or rent agreement in the name of the company along with a copy of rent paid receipt not older than one month;

3) the authorization from the owner or authorized occupant of the premises along with proof of ownership or occupancy authorization, to use the premises by the company as its registered office; and

4) the proof of evidence of any utility service like telephone, gas, electricity, etc. depicting the address of the premises in the name of the owner or document, as the case may be, which is not older than two months.

You can ask for endless lists of documents, but if there are no cross verifications or  punishment for lapses, how will things get better?


Changes under Companies Act 2013


Deposits


If Sec 76 conditions are fulfilled then deposits can be accepeted  by following the procedure under sec 72 

Alteration of Share capital 

If the alteration is within sec 61 then it can be altered by following sec13 procedure. If not then follow sec 67

EGM 

Sec 100 requires 10% requisition - within 15 days take steps for convening with in 45 . else within 90 days requisitionists can call by themselves. if MD does not allow place then as per chettair case it can be anywhere in the city in which RO is situated


Registration of charges

Sec 77 to 87 comprehensively covering the loose ends left over in the older act . Rules specifying forms CHG-1 to 7

Amalgamation

230 and 232 placed under different heads and 233 option given for ease of business