Companies (Amendment) Bill 2018 Current Affairs - 2019

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Government promulgates Companies (Amendment) Ordinance, 2019

The government has re-promulgated the Companies (Amendment) Ordinance, 2019 to amend the Companies Act 2013. Even though the Companies (Amendment) Bill, 2018 for this effect was passed in Lok Sabha, it was pending before Rajya Sabha. The ordinance was first issued in November and would have ceased to be operational from January 21. Hence the government has decided to re-promulgate the ordinance.

Features of the Companies (Amendment) Bill, 2018

The Loksabha had passed the Companies (Amendment) Bill, 2018. The bill had important features like re-categorisation of offences, reducing the burden on special courts and bringing down the applicable penalties for small companies, enhancing the jurisdiction of Regional Director for compounding offences, empowers the central government to allow certain companies to have a different financial year instead of being determined by the National Company Law Tribunal among others.

The main objective of the amendment bill was the promotion of ease of doing business along with better corporate compliance.

Promulgation of Ordinance

Article 123 of the Constitution empowers the President to promulgate Ordinances to amend certain laws when either of the two Houses of Parliament is not in session and hence it is not possible to enact laws in the Parliament.

Ordinances must be must be approved by Parliament within six weeks of reassembling or they shall cease to operate.

Similar power to promulgate the ordinance has been provided to the Governor of the state under Article 213.

Ordinances were provided as a stop-gap arrangement and not as an alternative legislation process. The promulgation of the ordinance is subject to judicial review

Lok Sabha Passes the Companies (Amendment) Bill, 2018

The Lok Sabha has passed the Companies (Amendment) Bill, 2018. The bill aims to amend the Companies Act, 2013. The bill would replace the ordinance promulgated on November 2018.

Features of the Companies (Amendment) Bill, 2018

The features of the bill are:

  • It provides for re-categorisation of offences. The bill re-categorises 16 offences including the issuance of shares at a discount, and failure to file an annual return as a civil offence.
  • The bill aims to remove the clause of imprisonment for officers for defaulting the rule which prohibits issuing shares at a discount, except in certain cases. Instead, the bill provides for a penalty equal to the amount raised by the issue of shares at a discount or five lakh rupees, whichever is lower.
  • The Bill states that a company may not commence business, unless it files a declaration within 180 days of incorporation, confirming that every subscriber to the Memorandum of the company has paid the value of shares agreed to be taken by him, and files a verification of its registered office address with the Registrar of Companies within 30 days of incorporation.
  • The Bill transfers the power to approve any changes in the financial year for a company associated with a foreign company and any alteration in the incorporation document of a public company which has the effect of converting it to a private company to the central government from the National Company Law Tribunal.
  • The Bill provides that failure make a declaration of interest when a person holds the beneficial interest of at least 25% shares in a company or exercises significant influence or control over the company may either be fined or imprisoned for up to one year or both.
  • The bill increases the ceiling up to which the regional director can compound (settle) offences with a penalty of up to twenty-five lakhs from five lakh rupees.

The amendments are brought in as per the recommendations of a committee constituted to suggest changes to the Companies Act, 2013.