PENAL PROVISIONS COMPANIES- IMPACT OF COMPANIES AMENDMENT ACT, 2017-
IMPACT OF COMPANIES AMENDMENT ACT,
2017- PENAL PROVISIONS
COMPANIES
SHORT SUMMARY:
In this Flash editorial, the author
begins by referring the Impact of Companies Amendment Act, 2017 on Penalties/files
under CA- 2013.
The Bill to amend Companies Act, 2013
was passed in Rajya Sabha on 19th December, 2017. This is second
Amendment Bill passed by the Parliament after notification of the Companies
Act, 2013 i.e. within a span of 40 months. The Companies (Amendment) Bill, 2017
suggests 93 amendments to the Companies Act, 2013. The Bill got the assent of
president on 3rd January, 2018 and become Companies Amendment Act,
2017.
This is article no. 303 of the series of editorials written by the author on corporate
laws {Including Companies Act, 2013, SEBI, RBI Regulations, IBC, LLP Act, 2008 etc.}.
Background:
The major amendments
in the Amendment Act, 2017 include clarity on definitions for identifying Associate
Companies, Holding & Subsidiary Companies, Related Parties etc;,
simplification of the private placement procedure, removal of requirement for
annual ratification of auditor, rationalization of provisions related to loan
to directors, and doing away with the requirement of approval of the Central
Government for managerial remuneration above prescribed Limits.
However, along with the above mentioned amendment
there are amendments in respect to penalty/ fees for default in many sections.
At some point penalties has been increased or somewhere has been relaxed.
We hope you will find the same useful.
Penalty / Punishment
A. Major Impact – Factor for Determining Level of Punishment:
Under
Companies Act, 2013 or under any previous Company Act there was no provision in
respect of determining the punishment on the basis of factors. Under Amendment Act,
2017 a new section to be added in the Act i.e. “Section 446A – Factor for determining level of punishment”
According
the this Section the Court or Special Court while deciding the amount of fine
or imprisonment under this Act, shall have due regard to the following factors,
namely
(a) Size of the company;
(b) Nature of business carried
on by the company;
(c) Injury to public interest;
(d) Nature of the default; and
(e) Repetition of the default
Note: After the amendments court shall
consider the factors for penalize the Company. It is a good move to consider
the different-2 factors for penalty in case of non –compliance.
B. Lesser Penalties for One Person Company or Small Companies:
Under
Companies Act, 2013 there are no provision in respect of lesser penalty on any
kind of Company. Penalties are same on all type of Companies irrespective of
their Capital, turnover etc. Under
Amendment Act, 2017 a new section to be added in the Act i.e. “Section 446B – Lesser penalties for One
Person Companies or Small Companies”
In this
section relief to OPC and Small Companies i.e. in case of failure to comply
with provisions of
§ Section
117(2)(c) – Resolution and Agreement to be filed
§ Section
137(3) – Copy of Financial statement to be filed
§ Section
92(5) – Annual Return
In case
of default, such company and officer in default of such company shall be
punishable with fine or imprisonment or fine and imprisonment, as the case may
be, which shall not be more than one-half of the fine or imprisonment or fine
and imprisonment, as the case may be, of the minimum or maximum fine or
imprisonment or fine and imprisonment, as the case may be, specified in such
sections.
C. Punishment for Fraud (Section 447):
As per
Amendment Act, 2017 Punishment of Frauds has been divided into 2 Categories
i.e.
I.
Person guilty of fraud involving an amount of at least ten
lakh rupees or one percent. of the turnover of the company, whichever is lower
shall be punishable with imprisonment for a term which shall not be less than 6
months but which may extend to ten years and shall also be liable to a fine
which shall not less than the amount involved in the fraud but which may extend
to three times the amount involved in the fraud.
II.
where the fraud involves an amount of less than ten lakh
rupees or one per cent. of the turnover of the company, whichever is lower and
does not involve public interest, any person guilty of such fraud shall be
punishable with imprisonment for a term which may extend to five years or with
fine which may extend to twenty lakh rupees or with both
D. Additional Late Filing Fees: in sub-section (1), for the
first and second provisos, the following provisos shall be substituted:
Effect of new proviso:
·
If Company fails to file Annual Return u/s 92
and Financial statement u/s 137 within time prescribed under their specific
sections “without prejudice to any other legal action or liability under this
act,” it may be submitted by payment of additional fees “which shall not be less than
INR 100/- (Rupees Hundred) per day” and different amount may be prescribed
for different classes of Companies.
·
If
company fails to file any other documents, facts, information etc other than
section 92 and 137 “without prejudice to any other legal action or
liability under this act,” it may be submitted by payment of additional fees as
may be prescribed.
HIGHER ADDITIONAL FEES: New
concept of higher additional fees has been introduced. As per this proviso
-
Where there is default on Two or More occasions in submitting, filling, registering, recorded
of documents,
-
without prejudice to any other legal action or
liability under this act,
-
may be file with “Higher Addition Fees”
-
as may be prescribed and
-
which shall not be lesser than “twice
the additional fee provided under first and second proviso”
Due to above mention proviso if
company fails to file any form with in time prescribed under its specific
section and company made the default TWO or “MORE OCCASION” then additional fees for filing of from shall be “TWICE of ADDITIONAL FEES
E. Punishment for Contravention (Section 147): in
If an auditor of a
company contravenes any of the provisions of sections 139, section 143, section
144 or section 145, the auditor shall be punishable with fine which shall not be
less than twenty-five thousand rupees but which may extend to five lakh rupees or four times the remuneration of the
auditor, whichever is less.
Provided that if an
auditor has contravened such provisions knowingly or willfully with the
intention to deceive the company or its shareholders or creditors or tax authorities,
he shall be punishable with imprisonment for a term which may extend to one year
and with fine which shall not be less
than fifty thousand rupees but which may extend to twenty-five lakh rupees or
eight times the remuneration of the auditor, whichever is less.
F. Punishment for Contravention of
(Section 73 or Section 76): The penalty has been changed
from fine not less than 1 Crore Rupees to 1 crore rupees of Twice the amount of
deposits accepted by the Company, whichever is lower.
The
officer of the company who is in default shall be punishable with imprisonment
and fine. Hence, the offence shall be
non-compoundable.
G. Other Amendment:
v
Section 184:
Minimum
Penalty with respect to failure by directors to disclose interest has been
omitted.
v Section 117:
The
minimum fine for non-filing under this section for company and officer in
default is proposed to be reduced from rupees five lakh to one lakh rupees and
from rupees one lakh to rupees fifty thousand
v Section 140: Removal of Resignation of Auditor
Fine in
case of failure to file resignation by auditor in Form ADT-3 to fifty thousand
rupees or the remuneration of auditor whichever is less.
(Author
– CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice
from Delhi and can be contacted at csdiveshgoyal@gmail.com). Disclaimer: The entire
contents of this document have been prepared on the basis of relevant
provisions and as per the information existing at the time of the preparation.
Although care has been taken to ensure the accuracy, completeness and
reliability of the information provided, I assume no responsibility therefore.
Users of this information are expected to refer to the relevant existing
provisions of applicable Laws. The user of the information agrees that the
information is not a professional advice and is subject to change without
notice. I assume no responsibility for the consequences of use of such
information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT,
SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION
WITH THE USE OF THE INFORMATION
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