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Promulgation of Companies (Amendment) Ordinance 2019

What is this Companies Ordinance and why is it implemented? Companies Ordinance is an amendment passed by the Ministry of Law and Justice which brings about certain positive amendments in the Companies Act 2013.

This amendment will further improvise the way of doing business and also establish better compliances for law abiding corporates and also punish severely those violating the laws.

The Companies Ordinance was first formed in the month of November 2018, but was not executed and later on the Ministry has issued the Companies Ordinance in 2019 in par with the provisions of the Companies Ordinance 2018.

In totality 29 sections were amended and two sections were inserted through previous ordinances. Let us look into the key drivers of the Companies (Amendment) Ordinance 2019:

  1. Directors Declaration

As per the new section 10A added, states that any company incorporated after the commencement of this ordinance shall not commence any kind of business unless the director makes a declaration within 180 days.  This will again be verified by the registrar that every subscriber to the memorandum has paid the value of shares agreed to be taken by him.

Failure in complying with the above section will attract a fine of INR 50,000 to be paid by the company.

  1. Elimination of Company name from the register

The Registrar has the powers to remove the name of a company from the Registrar of Companies if he has valid reasons that there is no business operations carried out by the particular company upon physical verification.

  1. Penalty for wrongdoing

In case a company or a person already subjected to penalty repeatedly is in default, then a penalty of twice the amount will be incurred as per section 454 A.

  1. Punishment for issuing shares at a 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.

    5. Alteration of Articles

This amendment has made it compulsory for the approval of the Central Government for the conversion of a Public Limited Company to a Private Limited Company which was previously vested in the hands of the Tribunal.

  1. Responsibility to register charges

As per section 77, Creation of charges must be registered within 30 days of creation or, on the discretion of the Registrar may extend up to 60 days from the date of application for which an ad valoram fee (A tax based on the value of the transaction or property) shall be levied.

  1. Resolutions and agreements to be filed

Upon failure of the company to file a resolution and agreement before the specified time, the company will be bound to pay INR 1,00,000/- as penalty. Suppose there is a repeated failure, teen the penalty will increase further by INR 500/- per day subject to a maximum penalty of 25 lakhs.

For any officer who is liable, the penalty is of INR 50,000/-, and in case of a repeated failure it will be extended further by INR 500/- per day subject to a maximum penalty of Rs. 5 lakh.

  1. Penalties in different sections

As per section 191, the penalty is raised from a minimum of twenty five thousand to one lakh rupees.

In section 441, the maximum limit is increased from 5 lakh rupees to 25 lakh rupees.

  1. Disqualification of Director

If a director breaches the limits of directorship, as per section 164 it leads to automatic evacuation from the office including from all the existing companies.

These are just few of the amendments mentioned in the Ordinance. This Ordinance is created for a smooth flow of business operations and also for all the companies to run the show in par with the rules and regulations laid down.

  1. Penalties on failure of filing Annual Returns

According to Section 92 if a company is in default for non filing of annual returns before the due date, then the company is liable for a penalty of Rs. 50,000/- and if there is a continuous default in payment, the penalty will increase with 100/- per day to a maximum of Rs. 5,00,000/-.

I have listed out the amendments which are easy to understand and for a detailed list of amendments there are expert consultants like Aavana Corporate Solutions who can help you out.

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