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  • Shreya Sharma

The Companies Act Amendment, 2020


On 29th August 2013, the President of India gave his assent to the Companies Act 2013 passed by the parliament which later came into effect on 1st April 2014.

The act with it’s enactment it aimed at easement process of doing business in India and improving Corporate Governance, by making companies more accountable. It came with significant concepts such as 1% company, small companies, dormant companies and corporate social responsibility along with changes in provisions relating to governance, e-management, compliance and enforcement, disclosure norms, auditors, mergers and much more.

The Companies Act 2013 replaced old Companies Act 1956 which although amended approximately 25 times was still considered to be out of date and inadequate compared to the legislation regulating companies in many other jurisdictions.

This act was positive step towards modernising India’s company law and aligning it to global standards. It gave increased decision making powers to the company and introduced provisions giving minority shareholders additional rights and protection.


The 2013 act has gone through considerable changes over the years, out of which the four major amendments were in the years 2015, 2017, 2019, 2020.

The proposed 2020 amendments under the bill were based on the recommendations submitted by the Company Law Committee, which was formed with representatives from Industry Chambers, Professional Institutes and Legal Fraternity. The recommendations of the committee were largely based on re categorisation of certain criminal compoundable offences into civil wrongs carrying civil liabilities, rationalisation of penalties, mechanisms for reducing overall pendency of disputes and certain other changes to address emerging issues impacting the working of corporates in the country.

The Amendment

For an Amendment bill to be converted into an act it should be passed in both the houses. On 19th September 2020, the amendment bill was passed in Lok Sabha and on 22nd September 2020 in Rajya Sabha. It was then passed by the President of India on 28th September 2020. After which Bill became an Act.

The Companies Act Amendment 2020 has 66 sections. The purpose of the amendment is to give liberty to carry out business.

The Changes

The Amended Act revolves around decriminalisation of the Companies Act 2013 and lightening rigour of penalties in case of defaults which can be determined objectively and which lack any element of fraud or do not involve larger public interest. Apart from decriminalisation, the amendment act also provides for changes in the definition of listed companies, CSR provisions, listing of securities abroad, periodical returns of unlisted companies, remuneration of independent directors and non-executive directors in the event of inadequacy of profits and also introduced a chapter on Producer Companies i.e. Chapter 21A.


1. Decriminalisation:

The major thrust of the amendment act is decriminalisation. The new act has removed the imprisonment for various offences, substituted fine by penalty and also reduced the amount of penalty payable in certain provisions. In case of certain minor omissions penal consequences have also been omitted.

2. Section 135, Corporate Social Responsibility (CSR):

Companies with CSR responsibility upto Rs. 50 lakh a year have been exempted from setting up a CSR committee. Furthermore, where the amount spent by the company towards a CSR activity in a financial year is in access to it’s CSR obligation then the company shall be allowed to set off their access amount towards their CSR obligations in subsequent financial years.

3. Exemption from the Listed Companies:

The Central Government along with consultation from SEBI can exclude some companies issuing specified classes of securities from the definition of listed companies. The objective behind this amendment is to exclude such private companies that list their debt securities on a recognised stock exchange upon their allotment on private placement basis thereby, falling under the definition of a listed company under the act. This has allowed the private companies that only lists it’s debt securities on the stock market to avoid the requirement to comply with all the obligations of a listed company such as filing of annual returns, maintenance of records and appointment of auditors which are quite on a risk of a private limited company.

4. Exemption from filing resolution:

The Act requires companies to file certain resolutions with Registrar of Companies, which include resolutions of the Board of Directors of the company to borrow money or grant loans. However, banking companies are exempt from filing resolutions passed to grant loans or to provide guarantees or security for a loan.

5. Section 117, Resolutions and Agreements to be filed:

The above exemption has been extended to registered Non-Banking Financial Companies and Housing Financial Companies.

6. Benches of the NCLAT:

The Amendment Act provides for the establishment of benches of the National Company Law Appellate Tribunal which shall ordinarily sit in New Delhi or such other place as may be notified.

7. Lifting of Securities in foreign jurisdiction:

One of the significant amendments of the Amendment Act is the empowerment of the Central Government to allow certain classes of public companies to list classes of securities in foreign jurisdiction.

8. Section 62- Right Issue:

The Amendment Act aims to reduce the timeline for applying for such Rights Issues at be less than the timeline currently prescribed i.e. 15- 30 days so as to speed up such issues.

9. Section 140- Removal, Resignation of Auditor and Giving of Special Notice:

In the section 140 of the principal act, in sub-section (3), if the auditor does not comply with the provisions of sub clause (2) he/she shall be liable to penalty of Rs. 50,000 or a amount equal to the remuneration of the auditor whichever is less and in case of continuing failure with further penalty of Rs. 500 each day after the first during which failure continues subject to a maximum of Rs. 5 lakh it stands amended that In the section 140 of the principal act, in sub-section (3) for the words “five lakh rupees”, the words “two lakh rupees” shall be substituted and maximum liability for an auditor has been reduced from Rs. 5 lakh to Rs. 2 lakh.

10. Section 149- Remuneration to Non- Executive Director:

In the Amendment Act, this provision has been extended and has allowed payment of adequate remuneration to non-executive directors in case of inadequacy of profits, including independent directors.

11. Section 129A- Periodic financial results for unlisted companies:

This section empowers the Central Government to require classes of unlisted companies to prepare and file periodical financial results. Complete the audit or limited review of such periodical financial results and file a copy with the Registrar of Companies within 30 days of completion of the relevant period.

12. Section 89- Beneficial shareholding:

This section enables the Central Government to exempt certain classes of persons from complying with the requirements of section 89 relating to declarations of beneficial interest in shares.

13. Producer Companies:

A new chapter has been inserted Chapter XXIA has been inserted relating to Producer Companies in the similar lines to that of the Companies Act, 1956. It includes companies which are engaged in production, marketing and sale of agriculture produce and sale of produce from cottage industry, this chapter makes provisions in relation to incorporation and management of such companies, directors, conduction of general meeting, share capital criteria and members rights in relation there to loans to members and investments, merger and amalgamation and penalties for contravention of the provisions.


The changes and amendments brought in by the Amendment Act 2020 is a significant step in increasing competitiveness amongst companies incorporated in India and stimulating efficiency and growth while providing for doing ease in doing business to the corporate. We can say that the year of 2020 has been a year of amendments in the corporate sector which will boost the working of the corporate and providing easier environment to live and grow.

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