Companies Amendment Bill, 2020 Update

Central Government has introduced “The Companies (Amendment) Bill, 2020” to further amend the provisions of the Companies Act, 2013. We have summarised the gist of amendments and its importance:

Objects of the Companies (Amendment) Bill, 2020:

• To decriminalize certain provisions of the Act to facilitate Greater Ease of Livingof Law abiding corporates, based on their gravity;
• To relax various provisions of the Act and its intensity

1. Reduction in timelines in “Rights Issue of Shares”:

Central Government has amended the provision related to “Right Issue of Shares” issued to the existing shareholders, wherein erstwhile the offer to existing shareholders can be made between 15 to 30 days. Now, by amending the provision, Companies can offer less than 15 days to opt for Right Issue of Shares.

Authors view: Reduce timelines for applying for rights issues. 

Applicability: To all Companies

Reduction in penalty for non-filing of Annual returns;

Central Government has reduced the maximum penalty from Rs 5 Lakh to Rs 2 Lakh in case of non-filing of Annual Return and financial statement.

Applicability: To all Companies

1. Filing of Periodical Financial Result for “unlisted Companies”:

Central Government has introduced a new provision, wherein such class or classes of unlisted companies may be required to provide / file the periodical financial results of the company to the registrar. Further, such class or classes of unlisted companies to be prescribed along with the format to file the report. 

Applicability: Yet to be prescribed

1. Relaxation in case of CSR Activity:

Companies spending less than Rs 50 lakh on CSR activity would be no longer required to form CSR Committee, whereas board can take the decision. 

It is also amended that, if the Company has spent on CSR Activity more than amount required to spend as per the provision of Company, then the excess amount spent can be set-off in the subsequent financial year CSR Activities.

Applicability: To all Companies

1. Remuneration to Independent Director:

Central Government by inserting a proviso, allows the Company to pay the remuneration to independent directors in case of inadequacy of profit in addition to the fee payable for attending board and committee meeting.

Applicability: Public Companies

1. Remuneration to Directors- Section 197:

Erstwhile in case of absence or inadequacy of profits, Company shall not pay remuneration to its directors including managing and whole time director. Now, this provision would apply to any other non-executive director, including an independent director".

Applicability: Public Companies