In order to strengthen the regulatory framework, The Government
takes Ordinance route to bring amendment to the Companies Act, 2013. The key
takeaways have been discussed hereunder:
1. Central Govt. gets the power to change the financial Year
Currently if Companies are required to change the Financial
Year, they have to file an application with the NCLT. Now, the Central Govt.
has the power to entertain the applications from a company, being a holding/
subsidiary/ associate company of a company incorporated outside India, to
follow a different financial year for the purpose of consolidation of its
accounts outside India.
2. Receipt of Share Money and Verification of Address must to
obtain certificate of commencement
Companies with share capital, which are incorporated after date
on which this ordinance comes into force, can’t start the business unless a
declaration is filed by them with the Registrar of Companies that every subscriber has paid the value
of the shares and its registered office has been verified. Any failure in
filing such declaration would be one of the grounds to strike off the name of the companies.
3. Physical verification of registered office
A Registrar may physically verify the registered office of the
company and if any default is found in complying with the requirement of
maintenance of registered office, he may initiate action for the removal of
name of the company from the register of companies.
4. Time for registration and modification of charges
The Ordinance reduces the maximum time period for registration
and modification of charge with the ROC from existing 300 days to 60 days from
date of creation/modification.
5. Hike in penalty for not appointing Key Managerial Personnel
It is mandatory for specified companies to appoint Key
Managerial Personnel (i.e., CEO, CFO and CS) under Section 203. Currently, any
failure in appointing the KMP would result in levy of penalty of Rs. 1 Lakh to
Rs. 5 Lakhs on the company and up to Rs. 50,000 on every officer-in-default.
The Ordinance now levies an absolute penalty of Rs. 5 lakhs on the company and
penalty of Rs. 50,000 on every Officer-in-default. In case of continuous
default there would be an additional penalty of Rs. 1,000 per day for each day subject
to maximum of Rs. 5 lakh.
6. Removal of imprisonment provision for certain defaults
As per existing provisions, every officer-in-default shall be
prosecuted with an imprisonment for term of 6 months and penalty if company
fails to file the annual return before the specified period. The Ordinance
removes the provisions of imprisonment of an officer-in-default in case of non-compliance of Section 92.
Similarly, the Ordinance removes the imprisonment provision
against all directors of the company in default for non-filing of copy of
financials to ROC.
7. Penalty for failure to issue statement along with notice
about voting by proxy
Section 105(2) requires every company (with share capital), or
where Article of Association provides for voting by proxy, to provide a
statement along with notice for calling general meeting that a member is
entitled to attend and vote or to appoint a proxy.
Any failure to comply with this requirement results in levy of
penalty of up to Rs. 5,000.
The Ordinance levies the absolute penalty of Rs. 5,000 for such
non-compliance.
8. Penalty on non-filing of resolutions and agreements to ROC
The Ordinance introduces a penalty of Rs. 500 per day in case
of continuing failure of non-filing of resolutions or agreements as specified
under Section 117(3) in addition to penalty of Rs. 1 lakh to Rs. 5 lakh against
company and Rs. 50, 000 against every officerin-default including liquidator of
the company.
