With effect from 21st December 2020, 17 provisions of the Companies (Amendment) Act, 2020 has come into force
Minor technical and procedure lapses were decriminalized by the Indian Parliament through an amendment passed on 22 September 2020. On 22 December 2020, a notification was issued in the Official Gazette by the Ministry of Corporate Affairs in this regard.
KEY AMENDMENTS NOTIFIED
Gautam Khaitan said that the Parliament amended the Companies Act, 2013 aiming to decriminalize certain provisions and making them civil wrong. “The thrust of the amendment was to decriminalize several non-compliance and defaults. Now, the amendment has removed the imprisonment for various offenses and reduces the amount payable as penalty. However, there are no relaxations in very serious offences and non-compliances”
Provisions providing criminal penalties for administrative lapses were harsh and against the idea of providing a safe and friendly business environment in the country by the current regime. “Consequently, professionals were reluctant to hold key positions including CFO, directors, independent directors, etc. Now, the amendment will reduce their concerns to a great extent,” Gautam Khaitan adds.
Gautam Khaitan suggested that this is a great step towards enhancing the confidence of stakeholders and investors from across the world in the Indian market. “Other than encouraging global investment sentiments towards India, you might also witness a rise in corporatization of small businesses across India in the light of the recent Amendment Act. It will also unburden the judiciary.”
Moreover, now the Central Government, in consultation with the Securities and Exchange Board of India, is empowered to exclude companies issuing specified securities from the definition of a “listed company”. The objective of according such flexibility is to exclude such private companies that list their debt securities on a recognized stock exchange upon their allotment on private placement basis, thereby falling under the definition of a ‘listed company’ under the Act. “Rigorous compliance and procedural requirements under the Companies Act, 2013 and the SEBI LODR (Listing Obligations and Disclosure Requirement) were burdening. Now, exclusion of certain types of securities and companies will certainly help,” he says.
Another important aspect is the exemption of Non-Banking Financial Company’s from filing the resolutions passed with the Registrar of Companies to grant loans/give guarantee/provide security in matters of loans. “Earlier, the exemption was only extended to the banking companies. This extension for the NBFCs is crucial. They are the backbone of our MSME sector and it was a matter of immediate attention. This provision of the Amendment Act will give much-needed support to our already struggling NBFCs.”
Gautam Khaitan is the managing partner of OP Khaitan & Co. With over three decades of experience in the corporate world, he has handled various corporate and litigation work for various leading multinational and national companies, banks, and financial institutions. He is now heading the Corporate Division of his firm.