Changes To Offences Brought By Companies Amendment Bill 2020

Companies Amendment Bill 2020. The Companies Act, 2013 replaced the earlier Companies Act, 1956, and made a number of changes in it. Companies Act is the Act that lays down the laws and procedures. Relating to incorporation, dissolution, and general working of the companies. Along with the procedures for appointment and removal of employees, directors, etc., and punishment for the offenses. Till now there have been a total of 104 amendments in total with the recent one. Being the Companies Amendment Act, 2020.

Contents  hide 

1 Introduction

2 Objective Of The Amendment Bill, 2020

3 Main Changes In Relation To Offences

3.1 The ones which are specifically in relation to offenses have been summarized below-

3.2 Changes in Companies Amendment Bill 2020

3.2.1 Civil being the ones of technical and clerical nature and whose main objective is not to categorize all offenses as a criminal offense and give penalties accordingly.

4 Reference

4.1 Related

Introduction

A Company Law Commission was set up in September 2019 under the chairmanship of Shri Injeti Srinivas with two main objectives of decriminalization of the offenses and improving the ease of doing business for businessmen in India.

After a lot of consideration and finally formulating all of the recommendations of the committee, the Companies (Amendment) Bill, 2019 was introduced in Lok Sabha by the Minister for Corporate Affairs, Ms. Nirmala Sitharaman, on March 17, 2020. It received Lok Sabha’s assent on 19th September 2020, and Rajya Sabha on 22nd September 2020.

The Amendment Act not only reduced the penalties but also added a new provision for producer companies which till now was being governed by the 1956 Act and even introduced changes to CSR policy and the remuneration guidelines for independent directors in case of loss among others.

It further even changed the composition of the National Company Law Appellate Tribunal (NCLAT), provided for maintenance of Periodical Financial Results, and also for monitoring of the Indian Companies incorporated outside India for the first time. One of the most important amendments was that a change was made in the definition of Listed Company because of which a number of companies would become private.

Objective Of The Amendment Bill, 2020

The main objectives with which the amendment bill introduced has been summarize below-

• decriminalize some provisions of the Act, based on their gravity;
• amend various provisions of the Act to decriminalize minor procedural or technical lapses under the provisions of the said Act, into civil wrong
• To constant Endeavour of the Government to facilitate Greater Ease of Living of Law-abiding corporates;
• To provide greater ease of living to corporates through certain other amendments to the Act
• Introduction of provisions for Producer Company in Companies Act, 2013

In short, the Amendment Bill had two main broad objectives of increasing the ease of living and ease of doing business and of decriminalizing various non-compoundable offenses in case of defaults.

Main Changes In Relation To Offences

The Companies Amendment Act came at a time when the world was suffering through the global pandemic of coronavirus. The Amendment Act mainly revolves around decriminalization of the Companies Act, 2013. And lightening the strict penalties in case of defaults which can determine. Objectively and which otherwise lack any element of fraud or of public interest.

The main focus was also to improve the ease of doing business. The Companies Amendment Act (CAA) in total has introduced 66 changes.

The ones which are specifically in relation to offenses have been summarized below-

• In total, 45 sections saw a change in the number of penalties that had been implemented. Out of them, in 10 sections, the penalty omits, and in the rest 35 sections, certain changes made.
• The bill omitted penalties from sections 48, 59, 66, 71, 284, 302,342,348,356 and 446. This is one of the major changes by the Amendment Act. For example, it removed the penalty for wrongful change in the rights of a class of shareholders.
• Another important amendment is that wherever a specific penalty not mentions, it imposes a penalty of 10,000 rupees which may extend to 1,000rupees for each day if the default continues.
• It also removed imprisonment in certain cases like removed imprisonment of 3years for the offense of wrongful buying back of shares by the company.
• In the majority of sections, it reduces the maximum fine which was payable, for example, in case of failure to file the annual returns with the registrar, the maximum penalty was of 5lakhs rupees which reduce to a maximum of 2lakh rupees.
• Further, section 446 which applies earlier only to One Person Company and the small company extends to apply to producer and start-up company and the provision by which the penalty reduces to 50% for the earlier, now further reduce for all four of them. In this section, reduce the maximum penalty for the company to 2lakh rupees, and for the defaulting officer a penalty of 1 lakh rupees.

Changes in Companies Amendment Bill 2020

The Law Commission decriminalizes certain offenses under the Act. With the reasoning that the presence of men’s rea or the guilty intention. In criminal offenses is the main point of difference between criminal and civil wrongs. The Act contains a number of offenses that were clerical in nature. Thus, the Committee suggested that the Act should be amended in a way so as to be foremost concerned with the classification of the offenses into criminal and civil.

Civil being the ones of technical and clerical nature and whose main objective is not to categorize all offenses as a criminal offense and give penalties accordingly.

The Law Commission further highlighted that due to the multiplicity of laws in India. An offense punished under various legislature and it. Therefore, suggests that the offenses mention in the Company Act and also have other specialized Acts. For them shall remove from the Company Act so as to cover almost entirely in one legislature only.

As a result, 9 offenses relating to non-compliance with the orders of the NCLT. In relation to the winding up of the companies. Offenses by shareholders, delay in payment of interest, reduction of share capital, etc. Remove so that they could all be covered under the Insolvency and Bankruptcy Code (IBC).

It further suggests removing the penalty of imprisonment of 23 offenses (compoundable offenses) and reduce the monetary penalty. Which is to Levi on them as a ‘fine’ instead of as a ‘criminal fine’. As these sections left it on the adjudicating officer to decide. The punishment in which the person can sentence to imprisonment or fine or both and also an amount. Not fix for the penalty and only a range provides, which led to a lot of different opinions.

Further in 22 offenses, the Act changes or reduces the penalty in a similar manner from that of a ‘criminal penalty’ to a ‘civil wrong as a fine’. This was done mainly in offenses relating to maintenance of records and filing of returns with the Registrar of Companies or ROC.

Reference

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[1] CS DiveshGoyal, Key Takeaways from Companies (Amendment) Act, 2020, TAXGURU, https://taxguru.in/company-law/key-takeaways-companies-amendment-bill-2020.html

[2] PrachiGoel , AnugyaSahai and Vinayaditya Reddy, The Companies (Amendment) Bill, 2020: Decriminalizing Offences Under The Companies Act, 2013, MONDAQ, https://www.mondaq.com/india/corporate-governance/944056/the-companies-amendment-bill-2020-decriminalizing-offences-under-the-companies-act-2013.