Companies (Amendment) Bill: 2020

The Latest

On 4th March 2020, the Companies (Amendment) Bill 2019 was approved by the Union Cabinet. The Bill was introduced on 17th March 2020 with a view to further amend the Companies Act, 2013.

The Minister of State for Finance, stated that the amendments (amongst others) sought to:

  • Decriminalize offences concerning lesser procedural and technical defaults that did not involve fraud or injury to public interest
  • Consequently, reduce the burden on the NCLT for issued relating to compounding of offences relating to minor offences.
  • Improve the ease of doing business.
  • Ease of living by the Corporates in the business environment.
  • Ease procedural restrictions and obligations on certain aspects of Company law, such as CSR.
  • Allow listing of Indian company securities in permissible foreign jurisdictions / stock exchanges as per rules to be prescribed.

A detailed look at the key exemptions that were approved by the union cabinet:

1. De-criminalization of offences

Hitherto, most offences under the Companies Act, 2013 had very strict penal and imprisonment provisions. The amendments introduced on 17th March 2020 proposed a total of 72 amendments to various sections of the Companies Act, 2013.

Of them:

  • 23 offences would be re-categorized out of the 66 compoundable offences under the Act and be dealt with through in-house adjudication framework
  • 11 offences to be limited to fine only
  • 7 provisions to be altogether omitted from Companies Act
  • 6 offences to have rationalized / reduced penalties
  • 5 offences to be dealt with through alternative framework

Such decriminalization was only with sections dealt with minor procedural and technical defaults which did not involve fraud and or injury to public interest and those which were non compoundable offences. The government would remove provisions of imprisonment in various sections and reduce penalties in case of various compoundable offences.

At least 45 sections of the Act contain provisions where penalty clauses have been omitted and or reduced. Imprisonment clauses in all such sections have been removed and instead substituted with penalty.

2. Creation

It is proposed to create / set up Benches of the National Company Law Appellate Tribunal (NCLAT).

3. Inclusion

  • The provisions relating to Producer company were present in the Companies Act 1956. The Companies act 2013 when originally enacted, omitted the chapter on Producer company. The amendment now seeks to reintroduce a new chapter / provisions relating to “Producer company”.
  • Non-executive directors and independent directors are to be put on the same plane as executive directors for payment of adequate remuneration in case of inadequacy of profits. Accordingly, it is proposed to amend provisions of sections 149 & 197 of the Act.
  • Startups and Producer companies to also be included for availing lesser penalties for small companies and OPCs u/s 446B of the Act. Also the “Lesser penalty” provisions to be made applicable to all provisions of the Act which attract monetary penalties. It is proposed to impose only half the monetary penalties for offences by start-ups, OPCs and small companies.
  • Specified classes of unlisted companies must prepare and file their periodical financial results. This is proposed by insertion of new section 129A.
  • Allow direct listing of securities by Indian companies in permissible foreign jurisdictions. This move is expected to provide better capital accessibility to Indian companies in terms of and better valuations.

4. Relaxation

  • Provisions relating to charging of higher additional fee for more than once default in filing or registering any document as provided in section 403 of the Act.
  • Eligible companies u/s135 of the Act to set off any excess amount spent in one financial year towards such obligation in subsequent financial year.
  • Within a certain window period, penalties shall not be levied for delay in filing annual returns and financial statements in certain cases.

5. Exemption

  • Certain class of companies shall be exempted from the definition of “Listed company” mainly for the purpose of listing their debentures on the stock exchanges. The Central government in consultation with SEBI shall have power to do so.
  • Certain classes of NBFCs and housing finance companies shall be exempt from filing certain resolutions (in respect of resolution to grant loans, or give guarantee or provide security in respect of loans) with the Registrar of Companies.
  • Any class of persons may be exempted from provisions relating to ‘Declaration of beneficial interest in shares u/s 89 of the Companies Act 2013.
  • Any class of foreign companies or companies incorporated outside India may be exempted from compliance of Chapter XXII relating to companies incorporated outside India.
  • Companies which have CSR spending obligation up to Rs. 50 lacs rupees shall not be required to constitute CSR Committee.

6. Elimination

It is proposed to eliminate the minimum 15 day criteria required for the rights issue to be open under section 62 of the Act. “Such lesser number of days” shall be prescribed. The objective being to speed up rights issue process under the section.


The Outcome

Since the enactment of the Companies Act, 2013 it has been regularly amended. From its first major amendment in 2015 to the latest one in 2019 and now the proposed amendment in 2020, the main objective of the Government has been to encourage ease of doing business and facilitate greater ease of living to law abiding corporates. With a host of amendments in this Bill, containing inclusion, exemption, relaxation and altogether elimination of certain provisions of the Companies Act, the thrust seems to be to boost the image of India as viable, competitive and profit-oriented business hub while increasing the ease of doing business.


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