Highlights of Companies Amendment Bill, 2019

The Companies (Amendment) Bill, 2019 is introduced in Lok Sabha to give the effect to the Companies (Amendment) Second Ordinance, 2019. Along with the ordinance, the bill has few additional amendments. The additional amendments in the bill were made available for public comments by Ministry of Corporate Affairs in November 2018. Important additional amendments over and above the Companies (Amendment) Second Ordinance, 2019 are as follows: 

1. Amendment to Section 90 - Register of significant beneficial owners in a company: Although onus of making declaration of Significant Beneficial Interest is on individual who holds Significant Beneficial owner, Sub- Section 4A is inserted in Section 90 which compels the Company to take necessary steps to identify Significant Beneficial Owner in relation to company. Further, the penalty for non-compliance of same are also provided

2. Amendment to Section 135 – Corporate Social Responsibility

                               I.            For the purpose of calculating CSR expenditure, a newly incorporated company that has not completed 3 years from the date of its incorporation is required to calculate  its average net profit for the years so completed

                            II.            Where a Company fails to spend on CSR, the bill proposes to create following   two situations

§  Situation 1 – The Company has  ongoing project

§  Situation 2 -  The Company doesn’t have  ongoing project

Situation- 1	Situation - 2
§  The the amount which is unspent should be transferred  to Special Account in a scheduled bank – within 30 days from the end of the Financial year; and §  The amount transferred is required to be spent within 3 Financial years from the date of such transfer §  On failure to comply -Transfer to fund specified in Schedule VII – within 30 days from the date of completion of 3rd Financial year	§  The amount which is unspent should be transferred to a Fund specified in Schedule VII, within a period of six months of the end of the financial year

                         III.       The penalty on failure to comply point II:

Company- Fine – Min – Rs. 50, 000 Maximum – Rs. 25,00,000

Officer in default – Imprisonment – upto 3 yrs OR

Fine - Minimum – Rs. 50,000 Maximum – Rs. 500,000 OR Both

3. Amendment to section 26, 29, 35 and 398: The Bill proposes that copy of the prospectus shall be filed with the Registrar instead of delivery for registration.

4. Enhanced Powers of Serious Fraud Investigation Office (SFIO): The Bill also seeks to provide that where an investigation report submitted by SFIO states that a fraud has taken place and any director, KMP or officer has taken undue advantage or benefit, then the Central Government may file an application before Tribunal with regard to disgorgement and such director, KMP or officer may be held personally liable without any limitation of liability.