Strict Penalties under Companies (Amendment) Act 2019

Penalty_1The Companies (Amendment) Act 2019 which recently received the assent of the President of India on 31st July 2019 has brought in some major changes in the Companies Act 2013. 

The important changes can be broadly categorized into 4 types: 

a) Stricter penalties prescribed in case of repeated defaults to ensure proper compliance

b) De-clogging of NCLT wherein jurisdiction of Regional Director (RD) has been enlarged by enhancing the pecuniary limits, Central Government (CG) has been vested with the power to approve alteration of the financial year, and to convert Public companies into Private companies. 

c) Changes with respect to creation, modification, and satisfaction of charge, the commencement of business, directorships beyond the permissible limit, to name a few. 

d) Re-categorising of offences

This article mainly focusses on the re-categorising of offences which have been listed in the table below:

Sl. No. Particulars Brief Note Punishment
1. Prohibition on issue of shares at a discount Any shares other than sweat equity shares shall be issued at a discount.  Liable to a penalty
2.  Annual Return Failure or Delay in filing Annual Return Both Company and every Officer in default Liable to a penalty
3.  Statement to be annexed to notice All notices sent for conducting special business not having a statement annexed to it. Every promoter, director, manager or other key managerial personnel who is in default shall be liable to a penalty
4. Proxies Default in providing a declaration regarding the appointment of proxy in a notice calling for a general meeting Every officer in default shall be liable to a penalty.
5. Financial statement to be filed with Registrar Failure/Delay in filing the financial statement  The Company, the MD, the CFO, the Directors, and other Officers shall be liable to a penalty.
6. Resolutions and Agreements to be filed with Registrar Failure/Delay in filing The Company and every officer in default including liquidator of a company, if any, shall be liable to a penalty. 
7. Punishment for Contravention in respect of DIN Holding of more than one DIN Any individual or director of a company in default shall be liable to a penalty.

Apart from the above-highlighted provisions on offences, there are several other offences where a penalty has been imposed in the company and the officers of the company in case of default. 

The Ministry of Corporate Affairs in order to ensure better corporate governance is focussing strictly on the legal compliances and non-compliance of the same is leading to severe punishments and penalties against the Company and the Directors. 

Thus, it is of prime importance that proper compliance structure is followed by every company so as to avoid any legal complications and unplanned financial burden. 



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