New Compliances and Penalties Introduced for Companies under Companies Act, 2013
The President of India promulgated the Companies (Amendment) Ordinance, 2018 on November 02, 2018 (“Ordinance”) in order to amend the Companies Act, 2013 (“Act”). The changes brought by the Ordinance are as follows:
- No company will be allowed to commence its business until (i) a declaration is filed by its director within six (6) months from the date of incorporation, declaring that every subscriber of MOA has paid the value of shares, agreed to be taken by him; and (ii) until a verification of registered office of the company is filed with the Registrar within 30 days of the incorporation of the company.
Failure to comply with this requirement will render the company liable to a penalty of Rs. 50,000/- and every officer in default will be liable of Rs. 1,000/- per day till the default continues but not exceeding Rs. 1,00,000/-;
- If the Registrar has reasonable cause to believe that the company is not carrying on any business, he can initiate the action to remove the name of the company from the Register of the Companies;
- Any alteration of the Articles of Association of the company which results into conversion of ‘public’ company to a ‘private’ company shall become valid only if approved by Central Government;
- Companies and every officer in default of such companies, offering shares at discount price, not in compliance with the Act, shall be liable to a penalty of an amount equal to the amount raised through such issue of shares or Rs. 5,00,000/-, whichever is less;
- Where any company fails to give notice to registrar of alteration in its share capital, such company and every officer who is in default shall be liable to a penalty of Rs. 1,000/- per day during which such default continues, or Rs. 5,00,000/- whichever is less;
- The time limit for registering ‘charges’ has been decreased from three hundred (300) days to sixty (60) days from the date of creation of charge;
- Any person or the company, aggrieved by the order of the tribunal on the issue of correctness of information provided by the beneficial owner of shares to the company or failure of the beneficial owner of shares to provide relevant information to the company, shall make an application against such order within one (1) year of passing of such order of the tribunal;
- A person failing to provide the information of his beneficial ownership of shares to a company shall also be liable for imprisonment for one (1) year;
- Officers in default of the company shall also be made liable to pay a penalty of Rs. 50,000/- and a continuing penalty of Rs. 100/- per day for which the failure continues, upto a maximum of Rs. 5,00,000/-, in case of failure of the company to file its annual return; and
- A new penalty has been added for instances where a company or an officer in default of a company already been subjected to penalty under this Act, again commits such default within a period of three (3) years from the date of order imposing such penalty, it or he shall be liable for the for an amount equal to twice the amount of penalty provided for such default under the relevant provisions of this Act.
Several other penalties have also been added or amended by the Ordinance in the Act.