Companies (Amendment) Ordinance, 2019- Comply or Face Consequences seems to be the order of the day

Companies (Amendment) Ordinance, 2019 which has just been introduced by the Government makes the intention of the Government amply clear- gone are the days of leniency; now the Government will take strict action against any company which does not take their compliance seriously.

 

Non-compliance

 

Some of the Key Highlights of the Ordinance are-

 

  1. If the Registrar has enough reason to believe that a company is not carrying on business then he, after a physical verification of the registered office, can remove the company’s name from the register of companies. ROC may strike off a company if subscribers have not paid initial share capital and filed requisite Form after incorporation of a Company within 6 months.
  1. Commencement Certificate is mandatory now to be obtain under section 10 A within 6 months of Incorporation without which, it cannot commence its business activity or borrow money.
  1. Conversion of public Ltd to Pvt Ltd matters shifted from NCLT to Regional Directorate who is essentially a representative of Central Government. This should ease some pressure off NCLT which is already under tremendous burden due to huge amount of Insolvency cases
  1. Company cannot issue shares at discount. Penalty equal to the amount raised by issuing shares at a discount or five lakh rupees, whichever is less. The company will also be liable to refund the amount with 12% interest.
  1. Alteration of Authorized Capital u/s 64 to be intimated within 30 days, default – penalty 1000 every day or 5 Lac whichever is less.
  1. Registration of charges should be done within 300 days if the charges are created before the commencement of the ordinance and within 60 days if created after the commencement of the ordinance
  1. Annual Returns should be filed within 60 days from Annual General Meeting. Failure to this, penalty of 100 per day to Company and director upto 5 Lakh apart from ROC delay charges is applicable. Penalty for certifying wrong Annual Return.

  2. Explanatory statement to be given with Notice of General Meeting must contain all details as required by Law otherwise penal consequences
  3. Filing of Resolutions with ROC is very important– Delay will be very costly now. Penalty for defaulter increased substantially.

    Failure to file resolution/Agreement within time shall attract a penalty on-Company- Rs. 1 lakh and in case of continuing failure, Rs. 500 for each day upto maximum Rs.  25 lakhs; Officer-in-default (including liquidator)-Rs. 50000 and in case of continuing failure, Rs. 500 for each day upto max. Rs. 5 lakhs

  1. Resignation of Auditor- If an auditor fails to file e-Form ADT-3 within 30 days of his resignation he shall be liable for a penalty of Rs. 50,000 or his/her remuneration whichever is lower, with an everyday penalty of Rs. 5000 if the failure continues.
  1. Appointment of CS on payroll (Pvt Co having paid-up capital 5 crore & above) is mandatory. Default is now very costly- penalty increased substantially. A further penalty of rupees  one  thousand  shall  be  levied everyday till the default continues however the same shall not exceed rupees five lakhs.

  2. Section 90- Register of significant beneficial owners in a company.
    Aggrieved party to make an application to  the  Tribunal  within  1  year  from  date  of  such order. In case no application made within this time, then such shares shall be transferred to IEPF. Person failing in making  declaration  shall  be imprisoned  for  1  year along  with  the  fine applicable and may even be levied fine and imprisonment both.

All in all the regulations imply a simple thing that once Paul McNulty, the Former US Deputy Attorney General said- “If you think Compliance is costly, try non-compliance”.

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