If Companies know the law is enforced, compliance is ensured!

Changes like decriminalizing various penal provisions of the Companies Act, 2013, setting up more benches of NCLAT, the establishment of Corporate Social Responsibility (CSR), etc. were brought up in the Companies Act, 2013 on the suggestion of the Company Law Committee ("committee"). This amendment mainly focuses on decriminalizing the various provisions of the Companies Act, 2013. The Company Law Committee comprises members from the legal field, professional institutes and various industries. On the 14th day of November 2019, the report had been submitted by the committee to the Union Minister of Corporate Affairs regarding the recommendations they have proposed. This amendment was very much needed in the current time to boost up the business of the corporate world and also to reduce the pendency of the cases in NCLAT. The new amendment in the Companies Act, 2013 is beneficial for the growth of the companies and will also be beneficial to smooth out the process of corporate business.1

Timelines Of The New Company Law Amendment Bill

The Companies (Amendment) Bill, 2020 was taken up before the Lower House of the Parliament by the Minister of Corporate Affairs on 17th March 2020 and got passed in the Lok Sabha and the Rajya Sabha on 19th September 2020 and 22nd September 2020 respectively. Subsequently, the President gave his assent to the bill on 28th September 2020.

FOCI Of The Amendment

  • The amendment covers the main provisions of the Act and decriminalizes various penal provisions mentioned under the company law. According to the Hon'ble Finance Minister, the decriminalization of penal provisions will be beneficial to all small scale companies by way of reducing the litigation burden on them. The Company Law Committee was of the view that such offences can easily be covered under other laws that are already prevailing in the current time such as Insolvency and Bankruptcy Code, 2016. If any void situation arises in future because of deletion of offences, it can easily be filled up with the help of section 450 of the Companies Act, 2013. 2
  • This new amendment reduces the payable amount of fine in certain cases like winding-up of companies, a default in the publication of NCLT order relating to the reduction of share capital, rectification of registers of security holders, variation of rights of shareholders and payment of interest and redemption of debentures and vanishes out the penalty and imprisonment for almost 9 offenses which were associated to non-conformity with the orders of National Company Law Tribunal (NCLT).3
  • Also, in the definition clause of the term 'Company', a new proviso has been inserted by way of this amendment, which authorize the Central Government to keep out the companies which have listed or intend to list such class of securities, as may be prescribed in consultation with the Securities and Exchange Board.4 The amendment has also brought some important provisions related to payment of remuneration to executive directors of a company including managing director and other whole-time directors.5
  • Another new modification that was introduced in this amendment was related to the filing of resolution. The new act wants the companies to file resolutions with the registrar of the companies. The exemption has been given to the banking companies, non-banking financial companies and housing finance companies.
  • According to the amended act, companies are asked to establish a Corporate Social Responsibility(CSR) committee and spend 2% of their average net profits in the three immediately preceding financial years, towards its CSR policy, provided that their net worth or turnover is above the amount specified.
  • This amendment also authorizes the Central Government to allow some classes of public companies to list classes of securities (as may be prescribed) in foreign jurisdictions.
  • If any person grasps at least a 10% share of the beneficial interest in a company or has the domination or control over the company then he is bound to provide a declaration of his interest to the company. The company will note the same declaration separately. This amendment also gives the power to the Central Government to excuse any class of citizens from abiding by these requirements. If necessary for public interest or for the good of a large number of people, the government can do the same.
  • This new act is also looking forward to establishing more benches of NCLAT, which helps in reducing the pendency of cases and increasing the settlement of disputes.
  • It is an option utilized by existing shareholders of a company to purchase further share capital which is governed by Section 62 of the Companies Act. In the initial scheme of the rights issue, a minimum time of 15 days and a maximum time of 30 days is given to the existing shareholder to accept the offer. The Company Law Committee was of the view to reduce the number of 'minimum 15 days'. The amendment has decreased the duration of the time limit from the date of the offer within which the offer, if not accepted, shall be deemed to have been declined.


No doubt, the modifications brought up by Company Amendment Act has the caliber to provide long term benefits to the country by boosting the business of the corporate world. Decriminalization of offences or lesser penalties will surely help small scale companies and producer companies in their compliance burden. Further, it will also help in motivating the people to run the corporate business in the country. Also, the decision of setting up new benches of NCLAT will definitely help in reducing the pendency of cases and settling disputes. The overseas listing of shares will help public listed companies to acquire entry to foreign jurisdictions for lifting their capital and sources which generate their capital.

Conclusively we can say that the step to bring this amendment in the Company Law is the right one and will also help in smooth out the process and growth of Indian companies.


1. Company Law Committee Report, "Ministry of Corporate Affairs, Government of India" Available at http://www.mca.gov.in/Ministry/pdf/CLCReport_18112019.pdf, last browsed 11/5/2020.

2. Company Law Committee Report, "Ministry of Corporate Affairs, Government of India" Available at Para 3.1 Page 26 of the Company Law Committee Report available at http://www.mca.gov.in/Ministry/pdf/CLCReport_18112019.pdf last browsed 12/05/2020

3. ibid

4. Companies Amendment Act, 2020, "Ministry of Law and Justice, Government of India" Available at https://www.mca.gov.in/Ministry/pdf/AmendmentAct_29092020.pdf last browsed 12/5/2020

5. Company Law Committee Report, "Ministry of Corporate Affairs, Government of India" Available at http://www.mca.gov.in/Ministry/pdf/CLCReport_18112019.pdf last browsed 12/5/2020.

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