The Companies (Amendment) Act, 2020 introduced in the Parliament on 17th March 2020 amends the Companies Act, 2013. This amendment comes along with the slew of reforms being introduced to the legislation. The main aim of this amendment is to ameliorate the ease of conducting business in India.
Section 135 of the Companies Act, requires companies having a turnover or net profit over a certain amount to spend two percent of their average net profits in the previous three financial years towards, CSR activities and to set up CSR Committees. The Amendment exempts companies that are not required to spend more than fifty lakhs rupees towards CSR activities, from forming CSR Committees and allows for the discharge of the functions of this Committee. Any excess amount being spent by companies toward their CSR obligations in any financial year can now be set off towards the company’s obligations in subsequent years.
A new chapter has been added in the Act with provisions for producer companies, removing previous provisions of the Act of 1956 which continued to apply in the 2013 Act.
Several changes have also been made concerning the removal of penalty, removal of imprisonment, and reduction in a fine payable for certain offenses. Over forty-six offenses have had imprisonment as punishment removed. For instance, imprisonment has been removed as a punishment for contravention of provisions concerning financial statements and Boards' report, the formation of companies with charitable objects, disqualification of directors and constitution of audit, disclosure of interest by directors, stakeholder relationship and nomination and remuneration committee.
Inclusion of a new sub-section for Section 23 of the Act, dealing with the public offer and private placement, empowers the Central Government to permit certain classes of public companies to list classes of securities in permissible foreign jurisdictions. Under this Amendment, the Central Government is also empowered to exclude certain classes of companies from the definition of a listed company and it can do so in consultation with the Securities and Exchange Board of India.
Previously, any person holding a beneficial interest of at least ten percent in the shares of a company, it is required for such a person to make a declaration of interest to the company. The amendment entitles the Central Government to exempt any such person from compliance if it is deemed necessary for the public interest.
Specific provisions concerning payment of remuneration to independent and non-executive directors have been made under this Amendment. Previously, in the case of inadequate profits, only managing and executive directors were entitled to receive remuneration under the Act.
Another notable change is the reduction in the time period for the rights issue, companies were previously allowed to have the offer period remain open for at least fifteen days, except private companies which subject to assent from ninety percent of shareholders can reduce the time frame. Now the Central Government shall provide a time period of less than the previous fifteen days for rights issue offer.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.
