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26 October 2020
On 28 September 2020 the Companies (Amendment) Act 2020 and the Foreign Contribution (Regulation) Amendment Act 2020 were given the president's assent and came into force. By way of these enactments, amendments have been made to certain provisions of the Companies Act 2013 and the Foreign Contribution (Regulation) Act 2010.
The salient features of the Companies (Amendment) Act 2020 are as follows.
Under the Companies Act 2013, certain provisions of the Companies Act 1956 continued to apply to producer companies, including with respect to membership, meeting conduct and account maintenance. 'Producer companies' include companies which are engaged in the production, marketing and sale of agricultural produce and the sale of produce from cottage industries. The Companies (Amendment) Act 2020 removes these provisions and adds a new chapter to the 2013 act with similar provisions on producer companies.
The Companies (Amendment) Act 2020 makes three changes to penalties for offences:
Penalties for one-person and small companies
Under the 2013 act, 'one-person' companies (ie, companies with only one member) and 'small' companies (ie, companies with lower paid-up share capital and turnover thresholds) are liable to pay only up to 50% of the penalty for certain offences (eg, failing to file an annual return). The Companies (Amendment) Act 2020:
Remuneration of non-executive directors
The 2013 act makes special provision for the payment of remuneration to executive directors (including managing directors and other whole-time directors) if the company has inadequate or no profits in a year. For example, if a company has an effective capital of up to Rs50 million, the annual remuneration paid to its executive directors cannot exceed Rs6 million. The Companies (Amendment) Act 2020 extends this provision to non-executive directors, including independent directors.
Periodic financial results for unlisted companies
The Amendment Act empowers the central government to require classes of unlisted companies (as may be prescribed) to prepare and file periodical financial results and to complete the audit or review of such results.
National Company Law Appellate Tribunal benches
The Companies (Amendment) Act 2020 establishes benches of the National Company Law Appellate Tribunal. These will ordinarily sit in New Delhi or such other place as may be notified.
The salient features of the Foreign Contribution (Regulation) Amendment Act 2020 are as follows:
For further information on this topic please contact Neetika Ahuja or Vasudha Luniya at Clasis Law by telephone (+91 11 4213 0000) or email (firstname.lastname@example.org or email@example.com). The Clasis Law website can be accessed at www.clasislaw.com.
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