Parliament has passed the Companies (Amendment) Bill, 2019.
What are the amendments proposed?
- The Companies Act, 2013 provided that certain classes of public companies are required to issue shares in a dematerialised form (Demat) only. The Bill expands the ambit of this provision for other classes of unlisted companies as well.
- The bill categorises 16 of 18 compoundable offences mentioned in the Companies Act, 2013 such as the issuance of shares at a discount, failure to file an annual return as civil defaults, where adjudicating officers (appointed by the central government) may now levy penalties instead.
- The bill also amends the penalties for some other offences.
- The bill provides that any unspent annual CSR funds must be transferred to one of the funds under Schedule 7 of the Act (e.g., PM Relief Fund) within six months of the financial year.
- The bill also provides that if the CSR funds are committed to certain ongoing projects, then the unspent funds will have to be transferred to an Unspent CSR Account within 30 days of the end of the financial year, and spent within three years. Any funds remaining unspent after three years will have to be transferred to one of the funds under Schedule 7 of the Act.
- The bill provides that for proven misconduct the punishment for auditors would be debarment from appointment as an auditor or internal auditor of a company, or performing a company’s valuation, for a period between six months to 10 years.
- The bill will allow regional directors of the ministry the power to settle offences with a penalty of Rs 25 lakh, a fivefold jump from Rs 5 lakh earlier.
- The bill provides that change in the period of the financial year for a company associated with a foreign company and any alteration in the incorporation document of a public company which has the effect of converting it to a private company has to be approved by the central government. This power was earlier vested with National Company Law Tribunal (NCLT).
- The Bill requires every company to take steps to identify an individual who is a significant beneficial owner (the person having at least 25% shares in a company or exercises significant influence or control over the company) and require their compliance under the Act by declaring their interests.
The bill aims to tighten Corporate Social Responsibility compliance, transfer certain responsibilities to National Company Law Tribunal and recategorize certain offences as civil offences.