The Companies Amendment Ordinance, 2018

Posted On - 6 February, 2019 • By - Raghav Gaind


On October
02, 2016, the Ministry of Corporate Affairs (“MCA”) transformed and streamlined the process of incorporation of
new company by introducing Form INC-32 SPICe (“SPICe”). SPICe was introduced as a single master form for availing
five services simultaneously which inter
included application pertaining to the finalisation of the company
name, incorporation of company, DIN of the directors, PAN of the company, TAN
of the company.

It is
imperative here to understand that these reforms have brought in lucidity to
the existing law thereby removing any scope of ambiguousness.  Therefore, in order to simplify the process
of conducting business activities in India, the President in exercise of the
powers conferred under Article 123(1) of the Constitution of India, had promulgated
the Companies (Amendment) Ordinance Bill, 2018 (“Ordinance”) as explained in this article herein below. The purpose
of this Ordinance is to relook into the offences given under the Act and to
bring insightful changes into the structure of the prosecution and the
re-categorization of the offence as to de-burden the court from the offences
which could be efficiently dealt with by the in-house adjudication because of
the procedural and technical lapses involved in the court process.

In consonance with the powers conferred upon, the Ordinance brings upon
the following changes in various provisions of the Companies Act, 2013
(hereinafter for the purpose of brevity be referred to as “Act”):

  • Financial
    Year of the Company:

to Section 2 (41) of the Act, every company whether public or private shall
have a uniform financial year ending on 31st March of every
financial year. Financial year, in relation to any company or body corporate,
means the period ending on the 31st day of March every year, and where it has
been incorporated on or after the 1st day of January of a year, the period
ending on the 31st day of March of the following year, in respect whereof
financial statement of the company or body corporate is made up.

to the first proviso, an application made by a company or body corporate, which
is a holding company or a subsidiary or associate company of a company
incorporated outside India and is required to follow a different financial year
for consolidation of its accounts outside India, the Tribunal may, if it is
satisfied, allow any period as its financial year, whether or not that period
is a year.

further mentions that a company or body corporate, existing on the commencement
of this Act, shall, within a period of two years from such commencement, align
its financial year as per the provisions of this clause; In pursuance of the
provisions, the Ordinance has substituted first proviso to Section 2(41) of the

in pursuance of the provision as explained above, the Ordinance bought in the
following amendment in the first proviso of Section 2 (41) of the Act. It
states that if any holding company or subsidiary company or any associated
company which is incorporated outside India and that the said company is
required to follow different financial year as per the provisions of laws where
the said foreign company is incorporated, therefore, under such circumstances, the
domestic company shall file an application with the Central Government to allow
the company to follow different financial year for the consolidation of the
accounts in such form and manner as may be prescribed whether or not that
period is a financial year.

it is clearly evident from the amendment that instead of Tribunal, the
application for change in the financial year shall be submitted to the Central
Government. It has been further clarified that for all the pending
applications, disposal shall be made by the Tribunal as per the existing

  • Commencement
    of the business:

Section has been inserted as a new Section after certain modifications in
Section 11 of the Act which was omitted by Companies (Amendment) Act 2015. To
provide clarification in relation to the time period for the disclosures to be
made and penalties due to non-compliance of section 10, the Ordinance has inserted
Section 10A which states that-

  1. any company having share capital incorporated
    after the commencement of the Ordinance shall not commence any business or
    exercise any borrowing powers unless-
  2. a
    declaration has been made by the director within 180 days from the date of the
    newly incorporated company. The declaration shall mention that every subscriber
    of the memorandum has paid the value of the shares agreed to be taken by him on
    the date of making such declaration.
  3. Such
    declaration shall be made to the Registrar of the Companies.
  4. If any default is made in complying with the
    provisions as mentioned under Section 10A, then the company shall be liable
    with a penalty of INR 50,000/- and every officer in default shall be liable to
    a penalty of INR 1000/- for each day during which the default continues but not
    exceeding INR 1,00,000/-.
  5. Further, it is imperative here to understand
    that if the Registrar of Companies has sufficient ground to believe that the
    declaration has been filed within a period of 180 days and the company is not
    carrying out its business, in such case the Registrar may initiate the
    proceedings of removing the name of the company from register of companies
    under Chapter XVIII.
  • Conversion
    of Public Company to Private Company:

14 of the Act deals with the alteration of the articles of a company.

consonance with the provisions of the Act, the Ordinance has amended the second
proviso of Section 14 and categorically mentioned that such alteration in the
articles shall be subject to the approval of the Central Government based upon
the application made by the company.

  • Re-Categorisation
    of Certain Offences:

Certain offences under the Act have been
re-categorised as defaults carrying civil liabilities to bring them under an
in-house adjudication mechanism. Some of the key provisions amended are as

  • Issue
    of shares at a discount;
  • Non-filing
    of annual return within the due date;
  • Failure/delay
    in filing financial statement;
  • Contraventions
    related to Director Identification Number;
  • Failure/delay
    in filing certain resolutions;
  • Failure/
    delay in filing statement by the auditor after resignation; and
  • Managerial


We observe that the basic intention of the Government of India behind introducing such Ordinance was to provide ease of doing business in India and enhance the level of corporate governance in Indian corporate world. It is imperative here to understand that in the past years, Indian economy has been growing at a bullet rate and there has been an immense proliferation of foreign investment in Indian market. This Ordinance has increased the accountability of the companies or any officer of the company and has provided relief to the companies and professionals. Further, the Government of India has introduced the Companies (Amendment) Ordinance Bill, 2019. The primarily focus of Companies (Amendment) Ordinance Bill, 2019 is on the current prosecution structure under the Act and re-categorization of offences which are technical defaults or procedural lapses as civil default and shift or transfer the proceedings of such case to in-house adjudication.

Contributed by – Raghav Gaind
Associate – Corporate

King Stubb & Kasiva,
Advocates & Attorneys

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