Tuesday, April 16, 2024


    This article on the analysis of Companies (Amendment) Bill, 2020; is written by  Sahil Mishra, Legal Researcher, and Content Writer at LegalThirst.com. He is a 2nd year Law Student at Llyod Law College, India. In this article, he discussed the proposed amendment in a very precise way. Read Now.


    The minister of finance, Anurag Thakur, introduced theCompanies (Amendment) Bill, 2020 in Lok Sabha on 17th March 2020. Having introduced this bill, he further added that the bill seeks to promote and prosper; “ethical and honest business in India”. 

    The bill is based on the Company Law Committee; which was set up under the chairmanship of Injeti Srinivas in September 2019; and mainly aims at decriminalizing several minor offenses stated in the Companies Act of 2013; which usually doesn’t harm the society or the public but have been a burden on the legal framework. Also it cynosures upon the ‘Corporate Social Responsibility’; by making the CSR process easy; and straight forward so that the companies can contribute to the welfare of the society; in what so manner they like to. 

    However, the opposition in the parliament (Congress); criticized the proposed bill amending the Companies Act of 2013 as according to them; the bill will dilute the corporate social responsibility of the corporate sector. The finance minister countered the assertion made by the opposition by saying that; it will only aid the businesses to grow and ease of doing business in the nation.


    The bill was introduced in Lok Sabha with an intent to;

    1. Decriminalize some provisions of the Act, based upon their severity and gravity.
    2. To amend various provisions of the Act to decriminalize minor procedural; or technical lapses into civil wrong, rather than penalizing, under the aforesaid Act.
    3. Also, To prosper and endeavor the law-abiding corporates by facilitating them greater ease of living and doing business.
    4. It is to promote ethical and honest business in the nation by loosening the penal provisions mentioned in the Act.
    5. To reduce the penalties in various compoundable offenses; and to eradicate imprisonment provisions from several sections of the Companies Act of 2013.


    The bill proposed seventy-two changes to the Companies Act of 2013. Almost twenty-three offenses would be re-categorized out of sixty-six compoundable offenses under the Act; which would be dealt with in-house adjudication framework. Further, seven compoundable offenses would be omitted. Also, the bill seeks to limit eleven compoundable offenses to fine only by removing the imprisonment part from the provisions; and recommends five offenses to be dealt with in an alternative framework.

    Some of the major amendments made are as follows;

    1. The definition of “Listed Company”, under Section 2(52) is to exclude such listed companies; and companies with the intention of getting listed in such class of securities from the category of “listed companies”.
    1. The bill removes the provisions of “Producer Companies”; and adds a new chapter with similar provisions with reference to such companies. These include provisions on their memberships, the conduct of meetings, and the maintenance of accounts. Producer companies are those companies that are engaged in production, marketing; and sale of agricultural goods and sale of produce from cottage industries.
    1. Under the proposed Act, one-person companies (companies with/which operates via single member); or small companies are only liable to pay 50% of the penalty for certain offenses listed in the Act. The Bill extends the provision to all producer and start-up (fresh) companies; limits the liability with a maximum penalty to the extent of two-lakhs rupees and one-lakh for a defaulting officer.
    1. The bill empowers the central government to allow certain classes of public companies; to list classes of securities in a foreign jurisdiction.
    1. The amendment has aligned Section 197(3) with Section 149(9) in order to include Non-Executive Directors; and Independent Directors within the ambit of remuneration payable under Schedule V; in case of no profits or inadequate profits. For instance, if a company has an effective capital of 5-crore rupees; the annual remuneration to its executive directors cannot exceed 60-lakh rupees.
    1. The act provides several exemptions from filing resolutions. Under the Act, companies are required to file certain resolutions with the Registrar of the companies. For instance, resolutions of Board of Directors of the company to borrow money, or grant loans. But, the banking companies, however, are exempted from filing such resolutions. This exemption has been extended to registered non-banking financial companies and housing finance companies.

    #7. The bill introduced a newly inserted Section 129A (Periodical Financial Results), which empowers the central government to require classes of unlisted companies to;

    1. prepare periodical financial results
    2. obtain approval of the Board of Directors 
    3. A complete limited review of such periodical financial results 
    4. File a copy with the Registrar of the company within 30 days of completion of the relevant period.
    1. The amendment seeks to bring changes in Section 135 of the Act, which deals with Corporate Social Responsibility (CSR). Under the Act, companies having net-worth above the specified amount are required to constitute a CSR committee; and must spend at least 2% of their average net profits in the last three financial years; towards the CSR policy/policies.
      The companies that have spent an excessive amount than the required CSR obligation; in a financial year can set-off the excess amount spent in subsequent financial years towards their CSR obligations.
      Further, the Bill exempts companies from having CSR liability up to 50-lakhs rupees to form a CSR committee. 
    1. The Bill also seeks to establish benches of National Company Law Appellate Tribunal (NCLAT), which shall sit in New Delhi or any other place as may be notified.


    1. Section 8(11): Formation of Companies with Charitable objects; the proposed amendment has exempted the Director/Officer of the company; in default from the imprisonment of three-years by omitting such provision from the Act. However, the existing penalty of a fine of 25,000 which may extend to 25 lakhs, remains.
    1. Section 26(9): Matters to be Stated in Prospectus; if a prospectus is issued in contravention to this section; then there shall be a fine on the company of a specified amount. However, the punishment for the person has also been limited to the fine only; as of the ‘imprisonment part that may extend to 3-years’; has been omitted from the section.
    1. Section 48(5): Variation of Shareholders’ Rights; where any default is made in complying with this section; the company was liable to pay a fine which may extend to 5-lakhs; and every officer of the company who is in default was subjected to imprisonment of 6-months; or fine that may extend to 5-lakhs or both. But the Bill has omitted the aforesaid section from the Act.
    1. Section 59(5): Rectification of Register of Members; earlier on default in compliance with this section; it would cause the company a fine which may extend to 5-lakhs; and imprisonment of the officer of the company up to 1-year with a fine extendable to the amount of 3-lakhs; which has been omitted in the proposed amendment to the Act.
    1. Section 71(11): Debentures; every officer of the company, on default on complying with the order of the Tribunal under this section; was subjected to imprisonment for a term which may extend 3-years and a fine that may extend to 5-lakhs. However, the Bill has elided such provisions from the Act.
    1. Section 348(7): Information as to Pending Liquidation; earlier if a Company Liquidator makes wilful default regarding referred section; then he was subjected to imprisonment for a term which may extend to 6-months; and a fine of 1-lakhs, or both. But the amendment has omitted the aforesaid section form the Act.


    Inevitably, the changes proposed in the Companies (Amendment) Bill, 2020 has the embryonic potential on conferring long terms benefits as it seeks to facilitate; and promote ease of doing business and law-abiding corporates in India.

    Moreover, decriminalizing several offenses in the Act will yield impalpable benefits in the form of goodwill; which earlier would have been dismantled by criminal sanctions for minor technical issues and lapses.


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