Key Changes Vide Companies Amendment Act, 2019.

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Major changes introduced the vide Companies Amendment Act 2019. The 2019 Amendment Act empowers the ROC to carry out a physical inspection of the registered office of a company if he has reasons to believe that the company is not carrying on any business or operations.

The Companies Amendment Act, 2019 has been recently passed by the parliament & Notified the Gazzette. We aim to give you highlights of the changes brought in through the new amendment.

 Background-

 To bring the law relating to the formation, functioning, and regulation of the companies in India in line with the current global scenario of corporate regulation, the Compies Act, 2013. was passed on 29 August 2013 after receiving the recommendations of the standing committee who examined the matter in detail.

 Companies Amendment Bill, 2019

 The Companies (Amendment) Bill, 2019 was introduced in Lok Sabha on July 25, 2019, by the Minister of Finance, Ms. Nirmala Sitharaman. It amends the Companies Act, 2013. 
  • Issuance of dematerialized shares
  • Re-categorisation of certain Offences
  • Corporate Social Responsibility (CSR)
  • Debarring auditors
  • Commencement of business
  • Registration of charges
  • Change in approving authority
  • Compounding
  • Bar on holding office
  • Beneficial ownership

Major Changes in Companies Amendment Act 2019

In order to give continuity to the amendments introduced by the 2018 Ordinance, it was re-promulgated on January 12, 2019, by another ordinance i.e. the Companies Amendment Ordinance 2019 (“Ordinance“) on January 12, 2019, with its provisions effective from November 2, 2018.

Major changes introduced vide Companies Amendment Act 2019

  • The 2019 Amendment Act empowers the ROC to carry out a physical inspection of the registered office of a company if he has reasons to believe that the company is not carrying on any business or operations.  If any default is found in complying with requirements for a physical registered office as envisaged under section 12(1) of the Companies Act, 2013, it is grounds for being struck off. This will enable stakeholders to check the versatility of their claims of the companies about complying with the Companies Act, 2013, including maintenance of required registers.
  • For starters, the erstwhile Section 441 (1)(b) stated that the Regional Director ("RD") or any other officer authorized by the central government may compound offenses punishable by fines up to INR 5,00,000, which now stands increased to INR 25,00,000. This move which expands the jurisdiction of the RD is expected to de-clog and significantly reduce the quantum of cases for compounding pending before the NCLT currently.
  • The other relevant change with respect to the compounding of offenses is in Section 441 (6). This Section previously permitted the compounding of offenses punishable under the Act with imprisonment or fine, or with imprisonment or fine or with both, subject to the permission of the Special Court. However, the amended provision puts a blanket and absolute restriction on the compounding of any offense punishable under the Act with imprisonment only or with imprisonment and also with fine and makes such offenses non-compoundable.
  • Stringent provision with reduced timelines have been imposed for modification for Charges
  • Breach for ceiling for directorship has been made grounds for disqualification.  For instance, holding directorship in more than 20 companies (with a limit of 7 listed companies and 10 public companies) leads to stated responsibilities not being taken care of.  Hence disqualification is brought in for such persons who exceed the permissible limit.

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