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The Lok Sabha on 19th September, 2020 has passed The Companies (Amendment) Bill, 2020 that decriminalizes several compoundable offenses. It also allows direct listing of Indian companies on Foreign Stock Exchanges and withdraws the criminal provisions in the Companies Act for violations of provisions of CSR rules. It also promotes ease of doing business. In this article we described about Lok Sabha passes Companies Amendment Bill, 2020.

Around 48 Sections of Companies Act, 2013 will be amended for decriminalizing compoundable offenses and 17 Sections for ease of doing business. The bill has come at a time when companies are stumbling under stress due the COVID-19 pandemic. The (4th amendment) Bill was introduced in the Lok Sabha in May, 2020 by Finance and Corporate Affairs Minister Nirmala Sitharaman.


Based on the report submitted by CLC, the Ministry of Finance has introduced the Companies (Amendment) Bill, 2020 which seeks to make amendments under the Companies Act, 2013. The bill has primarily two objectives:-

It decriminalizes “minor procedural or technical lapses….into civil wrong” thus approaching to principle “to further remove criminality in case of defaults, which can be determined objectively and which otherwise lack any element of fraud or do not involve larger public interest”and

Focuses on providing certain relaxation and benefits for greater ease of living for law abiding corporate.

Company Law Committee Report

Under the chairmanship of Shri InjetiSrinivas in September, 2019 CLC was constituted with a view to decriminalize offences as well as provide ease of doing business for corporate and stakeholders. It further provided the guideline of revoking 46 penal provisions in the following manner:-

  1. Re-categorising of 23 offences out of 66 compoundable offences to in-house adjudication framework wherein penalty will be levied by an adjudication officer.
  2. Omitting 7 compoundable offences.
  3. Restricting 11 compoundable offences to fine only (exclusion of imprisonment).
  4. Recommending 5 offences to be dealt with an alternative framework.

Main Motives of Carrying out the Companies Amendment Act 2020

  • One of the primary motives for the government to bring out this amendment was to increase the ease of doing business in the country.
  • The Ministry of Corporate Affairs set up the CLCs, and one of the main motives was to decriminalise different form of offences under the Companies Act 2013.
  • Through this consultation and recommendation, the committee wanted to decriminalise more than 46 offences under the Companies Act 2013.
  • Previously in the 2019 amendment, 16 offences under the Companies Act 2013 was already decriminalised.
  • Apart from these, the amendment specifically focussed on the requirement of Independent Directors. Under this amendment, there were several recommendations that independent directors receive more remuneration due to the number of responsibilities they undertake.
  • Due to this amendment, the amount of remuneration received by independent directors would be determined as per schedule V of the act. However, the amount of remuneration fixed under the act would not be indefinite.
  • This amendment would also permit Indian companies to list their securities in foreign stock exchanges. Through this amendment, both listed and unlisted companies would secure the benefits of listing their securities in an overseas stock exchange. Before, this procedure for listing securities in international stock exchanges was time-consuming.
  • Apart from this, the Companies Amendment Act has also brought out a new provision dealing with producer companies. This was omitted during the introduction of the Companies Act 2013. However, previously this provision was present under the Companies Act 1956.
  • Under the Companies Amendment Act, the requirement for having producer companies would be present under a special amendment act under a special provision.

Major Highlights of the Companies (Amendment) Bill 2020

While several changes has been proposed by the Company Law Committee (CLC), the key changes are as follows:-

  1. Decriminalization Of Certain Offences – The bill proposes changes to certain offences in relation to technical and procedural defaults which can be determined objectively or otherwise lack any element of fraud or do not involve larger public interest. Speaking on the bill, Sitaraman said “there are currently around 124 penal provisions compared to 134 under Companies Act 2013”. The said amendment will be carried out in Section 23 of the Companies Act.
  2. Producer Companies – The Companies (Amendment) Bill, 2020[1]proposes a new chapter XXIA relating to “producer companies and its incorporation”. This chapter has been introduced for the benefit of farmers, handloom, agriculture as well as cottage industries. The CLC Report defines a “Producer Companies as, “a body corporate comprising of farmers and agriculturists who work in cooperation with each other to promote better standard of living and gain easier access to credit, technology, market, etc.”
  3. Corporate Social Responsibility – The bill exempts the companies with a CSR liability of up to Rs. 50 lakh a year from setting up CSR committee. Furthermore, the Bill allows eligible companies to set off the excess amount towards there CSR obligations in the subsequent financial years.
  4. Direct Listing – The Companies (Amendment) Bill,2020 is to allow direct listing of securities by Indian companies in permissible foreign jurisdiction as per rules to be prescribed. This would be considered beneficial for start-ups to tap overseas market for raising capitals.
  5. Reduced Timeline For Issue Of Rights – As per section 62 of the Act the timeline of providing offer letter to the existing shareholder has been reduced to 15 days to not more than 30 days, beyond which the offer is to be deemed declined.
  6. Exemption of Filing Resolutions and Agreements-Section 117 requires the filing of resolution with the ROC. As per Companies Act, 2013 it exempts banking companies providing loan, guarantee, and security in connection of providing loan from filing the resolution in e-Form MGT-14. The current bill now proposes to extend such exemption to registered NBFC license and HFCs.
  7. Benches Of NCLAT – The Companies (Amendment) Bill,2020 proposes section 418A for setting up benches of the National Company Law Appellate Tribunal in order to ease the burden and also to decrease the pendency of cases. The ceiling of the maximum strength of NCLAT under section 410 of the Act has been proposed to be removed in the bill.
  8. Periodical Financial Results – This is a newly inserted clause in the bill under section 129A. The Central Government shall require such class or classes of Unlisted companies as may be prescribed-
  9. To prepare financial results on periodical basis
  10. Obtain approval of the Board of Directors
  11. File a copy of periodical financial results with the ROC within 30 days of the completion of the relevant period with such fees as may be prescribed.


The Companies Amendment Act of 2020 has brought out several changes in the way companies operate. Firstly, this is the fourth amendment to the Companies Act 2013. Previous amendments were made in the year of 2015, 2017, and 2019. Out of the above amendments, 2017 was the most comprehensive amendment which affected all provisions related to the Companies Act. The 2020 amendment has decriminalised different crimes which do not have the substance of fraud. Apart from this, the amendment has made it easier for companies to list their shares in international stock exchanges. So to conclude, it can be said that the amendment act has improved the ease of doing business for Indian companies.

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