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No Criminality in Business Default as per Companies (Second Amendment) Bill, 2019

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Companies (Second Amendment) Bill 2019

The Union Cabinet on 04th March 2020, approved the Companies (Second Amendment) Bill 2019 to amend the Companies Act, 2013. The amendment will improve the ease of doing business and will focus to remove criminality and punishments who do genuine and bonafide default in business under the Companies Act, 2013. This new amendment will bring a sigh of relief to all the corporates whether big or small who face a lot of difficulties in the name of various compliances while doing the business.

Why the need arises to introduce Companies (Second Amendment) Bill 2019

To boost the Indian economy, which is facing a lot of trouble from the past few years, the Government in consideration with other top statutory authorities introduced a Companies (Second Amendment) Bill, 2019 on the 04th day of March 2020. This amendment will help the Corporates who face various problems while doing their business. The Corporates on a day to day basis have to comply with various norms as implemented by the Government in order to operate their business. As the number of compliances increases rapidly, it is hard to keep track of all the compliances. So, in order to provide ease to the Corporate houses, the government introduced this bill which proposes to reduce the quantum of penalty.

Key Features of Companies (Second Amendment) Bill 2019

Finance Minister Nirmala Sitharaman explained the following key features of the amendment:

Companies (Second Amendment) Bill 2019

  • Removing Criminality and Punishment under the Act

The bill mainly aims to remove the criminality under the act to give the comfort of living for law-abiding corporates.

  • Reduction in Penalty

Over 72 changes to 65 Sections are proposed in the Companies Act which was passed in 2013 to reduce the quantum of penalty.

  • Re-categorization of Offences

The new bill also proposes to re-categorize 23 offenses.

  • Listing of Indian Entities on exchanges of foreign jurisdictions

The Companies (Second Amendment) Bill, 2019 also proposes to amend the Companies Act, 2013 to allow the listing of Indian firms on foreign stock exchanges. This will increase the competitiveness among the Indian companies and it will help to boost the economy of the Country. The agenda for the listing of Indian companies under the foreign exchange and securities laws will be finalized by the Union Finance Ministry in consultation with the top authorities like Reserve Bank of India, Ministry of Corporate Affairs and Securities and Exchange Board of India.

  • Corporate Social Responsibility

The Companies are exempted to form a CSR committee if their obligation to spend on the CSR activities is less than or equal to Rs. 50 Lakh

Some other proposals of Companies (Second Amendment) Bill 2019

Companies (Second Amendment) Bill 2019

  • The Companies Act, 2013 includes 81 compoundable offenses that are punishable with fine or imprisonment or both. The Companies (Second Amendment) Bill 2019 re-categorizes 16 of these offenses as civil defaults. It includes the issuance of shares at a discount and the Late filing of an annual return. Now the re-categorized offenses will have to pay penalties as levied by the Concerned Officers appointed by the Central Government.
  • The Companies Act, 2013 forbids a company from issuing shares at a discount, except in certain cases. If any company fails to comply with the rule, then it had to pay a fine between Rs 1 lakh and Rs 5 lakh and every officer of the Company is liable to face imprisonment for up to six months and a fine between Rs 1 lakh and Rs 5 lakh. This new amendment bill aims to eliminate the clause of imprisonment for officers as a punishment.
  • In Companies Act, 2013, the change in the financial period for a company related to a foreign company needs approval from the National Company Law Tribunal and any change in documents also needs approval through the Tribunal. This new amendment bill proposes to transfer the powers to the center.
  • Under the Companies Act, 2013, in case of failure of the declaration of interest by the person who holds at least 25 percent of shares in the Company or has significant control over the Company then that person is likely to be punished with a fine between Rs 1-10 lakh along with a fine for everyday default. This new amendment bill provides that such people may be either fined or imprisoned for 1 year or both.
  • This new Companies (Second Amendment) Bill, 2019 proposes to increases the penalty of settling offenses by a regional director to Rs 25 lakh from the previous Rs 5 lakh.


In a nutshell, hoping to improve the economy of the Company, the Government introduces the Companies (Second Amendment) Bill 2019 which proposes to reduce the penalty and to decriminalize the existing Act. We hope it will provide a more flexible working environment for doing the business in the Country.

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