Union Cabinet approves Companies (Second Amendment) Bill, 2019: Know all about it!

The Companies (Second Amendment) Bill, 2019 proposes to amend the Companies Act, 2013 to enable listing of Indian firms on foreign stock exchanges.

Created On: Mar 5, 2020 13:03 IST
Union Cabinet
Union Cabinet

The Union Cabinet gave its approval to the Companies (Second Amendment) Bill, 2019 on March 4, 2020. Prime Minister Narendra Modi had chaired the cabinet meeting. The Companies (Second Amendment) Bill, 2019 seeks to amend the Companies Act, 2013.

The Companies (Second Amendment) Bill, 2019 proposes to remove the criminality clause in the act in case of defaults, which can be determined objectively and does not involve larger public interest.

The bill will now be tabled in the Indian Parliament. It needs to be passed by both the houses and receive Presidential assent to become a law. 

Companies (Second Amendment) Bill, 2019: Key Features

The Companies (Second Amendment) Bill, 2019 proposes to amend the Companies Act, 2013 to enable listing of Indian firms on foreign stock exchanges. This would increase the competitiveness among the Indian companies with respect to access to capital, better valuations and broader investor base.

The framework for listing of Indian companies under the foreign exchange and securities laws will be finalised by the Union Finance Ministry in coordination with the Reserve Bank of India, Corporate Affairs Ministry and Securities and Exchange Board of India.

The bill mainly aims to remove the criminality section under the act to enable ease of living for law-abiding corporates. Over 72 amendments are proposed in the Companies Act, 2013, which are aimed at declogging of the criminal justice system in India. The new bill has also proposed re-categorization of 23 offences.

Following are some of the proposals of the Companies (Second Amendment) Bill, 2019:

The Companies Act, 2013 comprises 81 compoundable offences that are heard by courts and are punishable with fine or imprisonment or both. The Companies (Second Amendment) Bill, 2019 re-categorizes 16 of these offences including the issuance of shares at a discount and failure to file an annual return as civil defaults, where adjudicating officers appointed by the centre may the levy the penalties instead.

The Companies Act, 2013 prohibits a company from issuing shares at a discount, except in rare cases. If any company fails to comply with the rule then it can face a fine between Rs 1 lakh and Rs 5 lakh and every officer is liable to face imprisonment up to six months and a fine between Rs 1 lakh and Rs 5 lakh. The amendment bill aims to remove the clause of imprisonment for officers as a punishment. 

The Companies (Second Amendment) Bill states that a company cannot initiate a business, unless a declaration is filed within 180 days of incorporation, confirming that all subscribers have paid the value of shares agreed to be taken by them. The company also has to file verification of its registered office address with the Registrar of Companies within 30 days of establishment. In case of failure to comply with these provisions or when the company is found not to be carrying out any business, its name may be removed from the Register of Companies. 

The Companies (Second Amendment) Bill, 2019 also proposes a change in approving authority for the companies. Under the Companies Act, 2013, the change in the financial period for a company associated with a foreign company requires approval from the National Company Law Tribunal. Other approvals including any change in documents also have to go through the tribunal. The amendment bill proposes to transfer the powers to the centre.

Further, if a person holds beneficial interest amounting to at least 25 percent shares in a company or exercises significant control over the company, he is required to make a declaration of his interest. Under the Companies Act, 2013, in case of failure of the declaration of interest- the person is likely to be punished with a fine between Rs 1-10 lakh along with continuing fine for everyday default. The amendment bill provides that such people may be either fined or imprisoned for 1 year or both.

The Companies (Second Amendment) Bill, 2019 also increases the penalty of settling offences by a regional director to Rs 25 lakh from the previous Rs 5 lakh.


Previously, the Companies (Amendment) Act, 2015 had amended certain provisions of the Act to remove the difficulties faced in the implementation of various provisions of the Act.

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