Lok Sabha Passes the Companies Amendment Bill

The Lok Sabha on Saturday passed the Companies Amendment Bill 2020. This Bill provides for the decriminalisation of offences, changes in listing companies and producer companies. It proposes 72 changes to the present Companies Act 2013 to decriminalise, reduce and remove penalties of various offences. These changes improve the ease of doing business.

The Finance Minister, Nirmala Sitharaman said in the Parliament Session while passing this Bill that there are around 124 penal provisions currently as compared to 134 in 2013 under the Companies Act. She stated “The important point is that serious offences, called non-compoundable, from 2013 and today, the number of such offences will remain 35. These include fraud, injury to public interest or deceit.” This Bill provides for the decriminalisation of 48 Sections of the Companies Act. 

Decriminalisation means removing criminal nature from the offences. This Bill amends the provisions which provide for criminal punishment to the directors with only punishment of imposing fines. This decriminalisation of offences will help small companies as it reduces the burden of litigation on them.

Also Read: Banking Regulation Bill Passed by the Lok Sabha

This Bill also provides for amending the listing provision of the companies. Public companies can list its securities in stock exchanges of the permissible foreign jurisdiction as per the Bill. The Central Government can make a requisition to a class of unlisted companies to prepare a financial report on a periodical basis.

The Bill also provides that the Central Government can exclude specific companies from the definition of a listed company. These companies are companies which have listed their shares or intend to do so after consulting the Securities and Exchange Board of India. The Central Government can also exempt by notification any class of such private companies relating to declaration of a beneficial interest in shares from the definition of a listed company. 

The Bill proposes to amend the Corporate Social responsibility clause of the Companies Act. It provides for including the clause that if the company pays an excess amount, then it can set off such extra amount in the subsequent financial years. When the amount spent by a company does not exceed Rs 50 lakh for corporate social responsibility activity, they need not form a Corporate Social Responsibility Committee and the Board of Directors can discharge the functions of the Committee.

This Bill introduces a whole new Chapter on Producer Companies. It states the definitions relating to producer companies, its incorporation, management, general meetings, share capital, accounts and audit, loan to members and investment, amalgamation, merger and division, resolution of disputes, penalties and miscellaneous provisions. This chapter of producer companies is similar to the producer company provision of the Companies Act 1956. The Finance Minister said that the addition of the producer companies would be especially helpful for farmer producer organisations.

The Bill gives power to the Chairperson of NCLAT to form additional benches which perform the functions of NCLAT. Thus, it provides for the expansion of the benches of NCLAT.

This Bill proposes a lot of significant amendments to the present Companies Act 2013. These amendments will bring about ease in doing business and help the companies for the smooth operation of their day to day activities. It gives relief to the directors who will no longer have to face criminal punishment for a lot of offences. It will take away the stress from the directors. The amendment of the Corporate Social Responsibility clause will help the companies to carry forward the excess amount spent by them.

For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in

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