Lok Sabha passes Companies (Amendment) Bill 2020

The Lok Sabha on September 19 passed the Companies (Amendment) Bill to amend some 48 sections of the Companies Act, 2013 to decriminalise various offences and promote ease of doing business in India.

The proposed amendment will be carried out in Section 23 of the Companies Act. The Bill seeks to:

• Changes to offenses: The bill removes the penalty, imprisonment for certain offenses, and reduces the amount of fine payable in certain cases. However, Under the Act, one-person companies or small companies are only liable to pay up to 50% of the penalty for certain offences.

• Exclusion from listed companies: The Bill empowers the Centre in consultation with the Sebi, to exclude companies issuing specified classes of securities from the definition of a “listed company”.

• Exemptions from filing resolutions: The Act requires companies to file certain resolutions with the Registrar of Companies, which include resolutions of the Board of Directors of the company to borrow money, or grant loans. However, banking companies are exempt from filing resolutions passed to grant loans or to provide guarantees or security for a loan. This exemption has been extended to registered nonbanking financial companies and housing nance companies.

• CSR: The Bill exempts companies with a CSR liability of up to Rs 50 lakh a year from setting up CSR Committees.

• Benches of NCLAT: The Bill seeks to establish benches of the National Company Law Appellate Tribunal in New Delhi.

• Direct listing in foreign jurisdictions: The Bill empowers the central government to allow certain classes of public companies to list classes of securities in foreign jurisdictions.

Speaking on the house floor, Finance Minister Nirmala Sitharaman said this will reduce litigation burden on small businesses. She noted the amendment keeps 124 penal provisions compared to 134 in the original Act.

“There will be no relaxation for serious offences, including fraud and those that cause injury to public interest or deceit,” the finance minister sought to reassure, pointing out that the number of "non-compoundable" offences under the Act remains unchanged at 35.

Compoundable offences are those which can be dealt with via monetary sums.

  Report